[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
FUTURE MARKETS FOR
COMMERCIAL SPACE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON SPACE AND AERONAUTICS
COMMITTEE ON SCIENCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
APRIL 20, 2005
__________
Serial No. 109-10
__________
Printed for the use of the Committee on Science
Available via the World Wide Web: http://www.house.gov/science
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COMMITTEE ON SCIENCE
HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas BART GORDON, Tennessee
LAMAR S. SMITH, Texas JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California LYNN C. WOOLSEY, California
KEN CALVERT, California DARLENE HOOLEY, Oregon
ROSCOE G. BARTLETT, Maryland MARK UDALL, Colorado
VERNON J. EHLERS, Michigan DAVID WU, Oregon
GIL GUTKNECHT, Minnesota MICHAEL M. HONDA, California
FRANK D. LUCAS, Oklahoma BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland RUSS CARNAHAN, Missouri
W. TODD AKIN, Missouri DANIEL LIPINSKI, Illinois
TIMOTHY V. JOHNSON, Illinois SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia BRAD SHERMAN, California
JO BONNER, Alabama BRIAN BAIRD, Washington
TOM FEENEY, Florida JIM MATHESON, Utah
BOB INGLIS, South Carolina JIM COSTA, California
DAVE G. REICHERT, Washington AL GREEN, Texas
MICHAEL E. SODREL, Indiana CHARLIE MELANCON, Louisiana
JOHN J.H. ``JOE'' SCHWARZ, Michigan VACANCY
MICHAEL T. MCCAUL, Texas
VACANCY
VACANCY
------
Subcommittee on Space and Aeronautics
KEN CALVERT, California, Chairman
RALPH M. HALL, Texas MARK UDALL, Colorado
LAMAR S. SMITH, Texas DAVID WU, Oregon
DANA ROHRABACHER, California MICHAEL M. HONDA, California
ROSCOE G. BARTLETT, Maryland BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia BRAD SHERMAN, California
JO BONNER, Alabama JIM COSTA, California
TOM FEENEY, Florida AL GREEN, Texas
MICHAEL T. MCCAUL, Texas CHARLIE MELANCON, Louisiana
VACANCY
SHERWOOD L. BOEHLERT, New York BART GORDON, Tennessee
BILL ADKINS Subcommittee Staff Director
ED FEDDEMAN Professional Staff Member
KEN MONROE Professional Staff Member
CHRIS SHANK Professional Staff Member
ROSELEE ROBERTS Professional Staff Member
RICHARD OBERMANN Democratic Professional Staff Member
TOM HAMMOND Staff Assistant
C O N T E N T S
April 20, 2005
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Ken Calvert, Chairman, Subcommittee
on Space and Aeronautics, Committee on Science, U.S. House of
Representatives................................................ 9
Written Statement............................................ 10
Statement by Representative Mark Udall, Ranking Minority Member,
Subcommittee on Space and Aeronautics, Committee on Science,
U.S. House of Representatives.................................. 10
Written Statement............................................ 11
Prepared Statement by Representative Sheila Jackson Lee, Member,
Committee on Science, U.S. House of Representatives............ 12
Panel I:
Mr. Burt Rutan, Scaled Composites, LLC
Oral Statement............................................... 13
Written Statement............................................ 17
Biography.................................................... 22
Mr. Will Whitehorn, President, Virgin Galactic
Oral Statement............................................... 23
Written Statement............................................ 26
Biography.................................................... 28
Discussion
5-10 Year Commercial Space Industry Outlook.................... 29
Regulatory and Approval Process................................ 30
Similarities to Airlines....................................... 31
Export Controls and Tech Transfer.............................. 33
Economics of Commercial Space.................................. 35
Safety Concerns................................................ 37
Return-to-Flight............................................... 39
NASA Aeronautics............................................... 40
Panel II:
Mr. Elon Musk, Chairman and CEO, Space Exploration Technologies
(SpaceX)
Oral Statement............................................... 44
Written Statement............................................ 46
Biography.................................................... 47
Mr. John W. Vinter, Chairman, International Space Brokers
Oral Statement............................................... 47
Written Statement............................................ 49
Biography.................................................... 51
Mr. Wolfgang H. Demisch, President, Demisch Associates, LLC
Oral Statement............................................... 51
Written Statement............................................ 54
Biography.................................................... 55
Dr. Molly K. Macauley, Senior Fellow and Director, Academic
Programs, Resources for the Future
Oral Statement............................................... 56
Written Statement............................................ 58
Biography.................................................... 64
Discussion
Cost of Access to Space........................................ 64
Emerging Space-based Markets................................... 68
Appendix 1: Answers to Post-Hearing Questions
Mr. Burt Rutan, Scaled Composites, LLC........................... 72
Mr. Will Whitehorn, President, Virgin Galactic................... 77
Mr. John W. Vinter, Chairman, International Space Brokers........ 78
Mr. Wolfgang H. Demisch, President, Demisch Associates, LLC...... 80
Dr. Molly K. Macauley, Senior Fellow and Director, Academic
Programs, Resources for the Future............................. 81
Appendix 2: Additional Material for the Record
Statement of Herbert F. Satterlee, III, Chairman and Chief
Executive Officer, DigitalGlobe, Inc........................... 84
Statement of Peter H. Diamandis, President and CEO, X Prize
Foundation..................................................... 90
FUTURE MARKETS FOR COMMERCIAL SPACE
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WEDNESDAY, APRIL 20, 2005
House of Representatives,
Subcommittee on Space and Aeronautics,
Committee on Science,
Washington, DC.
The Subcommittee met, pursuant to call, at 9:35 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Ken
Calvert [Chairman of the Subcommittee] presiding.
hearing charter
SUBCOMMITTEE ON SPACE AND AERONAUTICS
COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES
Future Markets for
Commercial Space
wednesday, april 20, 2005
9:30 a.m.-12:00 p.m.
2318 rayburn house office building
Purpose
On Wednesday, April 20, at 9:30 a.m., the Subcommittee on Space and
Aeronautics will hold a hearing to examine the future of the commercial
space market and the government's role in that future. Last year, the
President signed into law the Science Committee's Commercial Space
Launch Amendments Act, which dealt with regulating one aspect of
commercial space--private, human sub-orbital flights, which are
generally intended for space tourism.
The first panel at the hearing will examine the potential for space
tourism, with a focus on last year's successful flights by
SpaceShipOne, the world's first privately-built and human-piloted
spacecraft.
Built by famed aircraft developer Burt Rutan, SpaceShipOne last
year won the Ansari X-Prize, a $10 million kitty raised by space
enthusiasts to stimulate entrepreneurial interest in space flight.
Rutan's ship was the first to fly to an altitude of more than 100
kilometers twice in two weeks, beating 25 other teams from seven
countries.
Virgin Galactic, founded by the Virgin entertainment and airline
company owner Richard Branson, has announced plans to buy a fleet of
spacecraft based on SpaceShipOne's design to carry tourists into sub-
orbital space (an altitude not sufficient to orbit the Earth), possibly
as early as 2008.
The second panel will examine the potential of the wider commercial
space market, which includes rockets to launch satellites and the
satellites themselves, which provide services ranging from beaming
images of landscapes and weather patterns, to global communications and
entertainment. The commercial space market has had a spotty record of
success. The government is very involved in the commercial space market
in a variety of ways, including providing permits for launches and
insuring private parties against catastrophic accidents. Perhaps most
significantly, the government is a leading purchaser of both satellites
and launch services.
Another potential aspect of the commercial market--private
provision of services for the National Aeronautics and Space
Administration (NASA) to service the International Space Station--will
not be a focus of this hearing.
Witnesses:
FIRST PANEL:
Mr. Burt Rutan founded his company Scaled Composites, Inc. in 1982. For
SpaceShipOne's achievements, Mr. Rutan this month received the Collier
Aerospace Trophy, the most prestigious prize in aeronautics.
Mr. Will Whitehorn is the President of Virgin Galactic and Group
Corporate Affairs and Brand Development Director for Virgin Management
Limited.
SECOND PANEL:
Mr. Elon Musk is the CEO and Chief Technology Officer of Space
Exploration Technologies (SpaceX) in El Segundo, CA. He formerly
founded two Internet companies, PayPal and Zip2 Corporation.
Mr. John W. Vinter is Chairman of the International Space Brokers
(ISB). ISB represents nine of the twenty satellite companies in the
world and is the only insurance broker that is focused exclusively on
the space industry.
Mr. Wolfgang Demisch, the founder of Demisch Associates, LLC, is an
aerospace financial analyst.
Dr. Molly Macauley is a Senior Fellow and Director of Academic Programs
at the Resources For the Future.
Overarching Questions:
The Committee will focus on the following questions at the hearing:
1. What is the outlook for the various aspects of the
commercial space industry over the next five to ten years?
2. What should the government do or not do to encourage the
nascent commercial space industry?
3. How can the commercial space industry avoid some of the
pitfalls that have led to unrealized expectations in the past?
Background:
The Rise of Commercial Space Industry and the Role of Legislation
From the dawn of the space age through much of the 1980s,
governments dominated efforts in space. Governments financed and owned
most satellites, which were launched on government-owned vehicles,
including the Space Shuttle.
The Challenger accident in 1986, however, helped spur private
sector ownership of both satellites and launch vehicles. After the
Challenger accident, for example, government agencies, particularly the
Department of Defense, viewed the Space Shuttle as too risky to be the
sole launch vehicle for U.S. Government payloads and began looking for
alternatives.
The Science Committee passed the Commercial Space Launch Act (CSLA)
of 1988, which required NASA to purchase launch services for satellites
from private companies rather than purchasing the launch vehicle
itself. The CSLA ensured a market for the nascent launch industry by
requiring the government to be a customer.
The CSLA also provided another element intended to foster the
success of the new industry--indemnification against catastrophic
accidents. Because a single launch failure had the potential of causing
billions of dollars of damage should the debris fall on populated
areas, the private sector argued that no private insurance company
would offer coverage to a satellite company or launch provider unless
the government agreed to indemnify (that is, pay for) at least a
portion of the potential damages.
The CSLA indemnifies companies for catastrophic losses--losses
above the amount of damages that private insurers calculate to be the
maximum probable loss (for which private insurers themselves provide
coverage) to a ceiling of $1.5 billion. While there is debate over
whether indemnification is necessary as the satellite launch industry
matures, Congress last year, led by the Science Committee, extended the
indemnification provisions of the CSLA through December 31, 2009.
The CSLA also established a permitting process within the Office of
Commercial Space Transportation (known as AST), now housed within the
Federal Aviation Administration (FAA), for all private commercial
launches.
Last year, as SpaceShipOne became the first privately funded,
developed, and operated spacecraft to carry a person into sub-orbital
space, the Science Committee passed legislation designed to foster a
commercial space tourism industry. The Commercial Space Launch
Amendments Act of 2004 gave AST explicit authority to permit launches
with humans on board and provided guidance on how to use that
authority. One key provision created a new kind of permit that would
facilitate flights by experimental vehicles, modeled on the regime
another part of FAA uses to regulate airplanes. (That part of FAA is
known as AVR.) Another key provision limited the extent to which AST
could regulate passenger safety in the near-term. (A summary of the Act
is attached.)
The Challenges Faced by Commercial Space Industries
Commercial space industries today include communication satellite
developers (including radio, television, and telecommunications),
launch service providers (whose customers include the government),
satellite imagery companies, and perhaps soon, space tourism companies
like Virgin Galactic and companies servicing the International Space
Station.
One of the first challenges these companies face is securing
financing. Space assets are expensive, and launching into space is
fraught with risk. One or two launch failures can drive a company into
bankruptcy. Finding investors is thus very difficult for new entrants
in the space business, who frequently must court risk-seeking, ``angel
investors'' rather than relying on more established financing firms.
Space industries must also secure insurance. But there are limits
to the private pool of insurance available, which can pose a challenge
to newcomers to the space business, who necessarily lack a track record
to demonstrate their reliability to insurers. Moreover, costly failures
in one portion of the space industry can affect the availability of
insurance for the rest.
Perhaps the greatest challenge commercial space industries face is
capturing a market large enough to sustain them. Unfortunately, their
history of success in doing so has been spotty. The commercial
satellite imagery or remote sensing industry has failed to develop as
originally expected. But satellite radio seems to be gaining in
popularity despite the abundance of free competition on more
traditional airwaves.
Still, markets can be elusive. For example, optimism for
communications satellite manufacturers ran high in the 1990s when
markets opened in China and the former Soviet states, where there was
little permanent communications infrastructure. Three U.S. companies
raced to take advantage of the seemingly boundless opportunities.
Iridium, a Motorola spinoff based in Chicago, was the first company in
the race. It launched 66 communications satellites into orbit. Next was
Globalstar, which had planned to launch 48 satellites.
But the ground-based cell phone industry was quicker. Its
penetration into the former Soviet and Chinese markets soon rendered
Iridium's and Globalstar's investments practically useless. Iridum's
assets were ultimately sold to a group of private investors, which
continue to own and operate Iridium today. (The Department of Defense
continued to use Iridium throughout the change in ownership.) A third
company, Teldesic, had planned to launch 288 satellites, but could not
attract enough investors after the failure of Iridium and Globalstar.
As satellite producers saw their fortunes fade so did those
companies who had hoped to put those satellites into orbit. Lockheed
Martin and McDonnell Douglas had earlier invested large sums, aided by
the government, to develop a new generation of launch vehicles. Boeing
launches Sea Launch and the Delta series of rockets (obtained when
Boeing took over McDonnell Douglas), and Lockheed launches the Atlas
series of rockets. The Europeans have a competing Ariane rocket.
Unlike the Space Shuttle, these rockets are used only once, so they
are known as Expendable Launch Vehicles (ELVs). The most advanced of
the Atlas and Delta class vehicles, developed with the U.S. Air Force,
are known as Evolved Expendable Launch Vehicles (EELVs). Elon Musk is
developing a series of rockets dubbed Falcon, which he believes will
launch at a significantly lower cost.
With the decline of the satellite industry, the rocket
manufacturers were left with too few customers to easily recoup their
costs. That has raised the cost of launches to the government. The
recently released White House Space Transportation Policy is designed
to find a way to provide enough business to keep two competing U.S.
entities in the launch market. NASA's pending decisions on how to
launch its scientific satellites and on how to launch the planned Crew
Exploration Vehicle would affect the market.
SpaceShipOne
Burt Rutan's SpaceShipOne is an effort to open a new aspect of the
commercial space market--space tourism. Rutan had to complete two
consecutive successful flights to earn the X-Prize. Those flights were
not trouble-free. The vehicle rolled 29 times during the first flight;
the vehicle shook but had only a ``little roll'' during the second
flight, according to the pilot. No one was injured in either case.
Questions Asked of the Witnesses:
In their letters of invitation, the witnesses were asked to address
the following questions in their testimony:
Mr. Burt Rutan:
1. What is the future of your commercial SpaceShipOne program
and do you see other customers beyond Virgin Galactic?
2. What should the government do or not do to encourage
commercial space endeavors?
3. If you develop other vehicles, where would you expect to
find investors? Do you think the traditional investors of Wall
Street are likely to step forward?
4. As you move into the commercial world, how do you expect to
be able to get insurance coverage?
Mr. Will Whitehorn:
1. When does Virgin Galactic plan to take ownership of the
five SpaceShipTwos that it has ordered from Scaled Composites?
How soon do you expect to be flying? When do you expect to make
a profit?
2. What is different in preparing to take ownership of a fleet
of spaceships vs. Virgin Atlantic taking ownership of a fleet
of airplanes?
3. What preparation are you engaged in for the commercial use
of these vehicles?
4. What, if anything, should the government be doing or not
doing to encourage commercial space?
Mr. Elon Musk:
1. What business plan do you have to make your launch vehicle
a success in the commercial market?
2. What do you see as the outlook for commercial space
activities in the next five years? The next ten years?
3. What, if anything, should the government do or not do to
encourage the nascent commercial space industry?
4. Are there implications for the commercial space industry as
you see it in the President's announced Vision for Space
Exploration?
Mr. John H. Vinter:
1. What kind of activities does your company include for
insurance purposes in its definition of ``commercial space?''
2. As insurance brokers, what do you see as the outlook for
commercial space activities in the next five years? The next
ten years? How do you think we can avoid exaggerated
expectations for the industry, such as those that occurred in
the low-Earth orbit (LEO) market in the late 1990s?
3. What, if anything, should the government do or not do to
encourage commercial space endeavors?
Mr. Wolfgang Demisch:
1. Considering some of the difficulties in the past for
commercial space business, (the low-Earth orbit launches
anticipated for Iridium, Teledesic, etc.) and the slow growth
of the commercial remote sensing industry, what is your outlook
for this nascent commercial space launch business and how do we
avoid the failures of the past?
2. In the entrepreneurial commercial space arena, when would
you expect traditional Wall Street investors to become classic
``risk-reward'' investors, in place of the ``angel'' investors
that we see today?
3. What, if anything, should the government do or not do to
encourage commercial space endeavors?
Dr. Molly Macauley:
1. What kinds of activities would you include in ``commercial
space?''
2. Is the U.S. the leader in ``commercial space?'' How does it
compare with the status of international commercial space?
3. What do you think the government should do or not do to
encourage commercial space?
4. What do you see as the outlook for commercial space
activities in the next five years? The next ten years?
APPENDIX
Commercial Space Launch Amendments Act of 2004
H.R. 5382, the Commercial Space Launch Amendments Act of 2004, is
designed to promote the development of the emerging commercial human
space flight industry by putting in place a clear, balanced regulatory
regime.
The Act assigns to the Secretary of Transportation jurisdiction
over commercial human space flight and requires the Secretary to craft
a streamlined experimental certification process for sub-orbital
reusable launch vehicles. The Secretary of Transportation must ensure
that only one license or permit is required to conduct human space
flights. By its licensing or permitting of flights, the United States
does not certify the safety of the flights for passengers or crew.
The Act requires the Secretary of Transportation to protect the
uninvolved public when licensing commercial human space flights. The
Act also requires that crew receive training and satisfy medical
standards. Space flight participants must undergo appropriate medical
exams and training requirements, and must provide written informed
consent for their participation. For the first eight years after
enactment of the legislation, the Secretary of Transportation may issue
regulations governing the design or operation of a launch vehicle only
if the design or operation has indicated likely safety problems through
operational experience.
The Act extends the existing liability indemnification regime to
the commercial human space flight industry, but excludes launches under
an experimental permit.
SUMMARY OF H.R. 5382,
Commercial Space Launch Amendments Act of 2004
Introduced by Mr. Rohrabacher (CA) and co-sponsored by Mr. Boehlert
(NY) and Mr. Gordon (TN)
Key features of the Act include:
The Act will make it easier to launch new types of
reusable sub-orbital rockets by allowing the Secretary of
Transportation to issue experimental permits that can be
granted more quickly and with fewer requirements than licenses;
Under the Act, permits will allow an unlimited number
of experimental flights, rather than requiring a license for a
single launch or small number of launches;
The Secretary of Transportation must ensure that only
one license or permit is required to conduct human space
flights;
The Act will require the Secretary of Transportation
to issue regulations for crews relating to training and medical
condition;
The Act will limit requirements for paying passengers
(or ``space flight participants'') a medical exam, training,
and to being informed of the risks of their participation and
providing written, informed consent;
By its licensing or permitting of flights, the United
States does not certify the safety of the flights for
passengers or crew;
For the first eight years after enactment of the
legislation, the Secretary of Transportation may only issue
regulations governing the design or operation of a launch
vehicle if the design or operation has indicated likely safety
problems through operational experience;
The Act will require paying passengers to execute
waivers of liability with the Federal Government; and
The Act will extend the existing liability
indemnification regime to commercial human space flight
launches, but the bill will not grant indemnification for
flights conducted under experimental permits, which will be
more lightly regulated.
Chairman Calvert. Good morning.
Pursuant to notice, I hereby call this meeting of the Space
and Aeronautics Subcommittee to order.
Without objection, the Chair will be granted authority to
recess the Committee at any time. Hearing no objections, so
ordered.
Today, we are going to examine the future of the commercial
space market. We are going to have two panels. The first will
examine the success of the world's launch, the hopes of our
nascent commercial space industry that led to a robust market
for space tourism.
Burt Rutan's SpaceShipOne is a manned, reusable launch
vehicle that has successfully flown twice in two weeks carrying
the equivalent of three people. His team won the X-Prize in
October, and last night, his team was awarded the 2005 Collier
Trophy, congratulations, which recognizes those who have made
the most significant achievement in the advancement of
aviation.
Joining him will be Will Whitehorn, President of Virgin
Atlantic. Virgin Atlantic will be buying the first fleet of
five of a derivative of these spaceships that takes space
tourists into sub-orbital space.
On the second panel, we have Mr. Elon Musk, the CEO of
Space Exploration Technologies, or SpaceX. I was most impressed
with the work his folks are doing when I was touring his
facility in El Segundo. His company is developing a new family
of launch vehicles, the Falcon. He will offer his insights on
the business plan and how he intends to emerge as a success in
this commercial space business.
Also, on this panel will be Mr. John Vinter, the Chairman
of International Space Brokers. He will offer guidelines that
the insurance community requires for those start-up companies
and how they must compete with the established aerospace
companies for insurance coverage.
Our third panelist is Mr. Wolfgang Demisch, a pre-eminent
expert and financial analyst in the aerospace industry.
And finally on this panel, we will have Dr. Molly Macauley,
a Senior Fellow and Director of Academic Programs at the
Resources for the Future. Dr. Macauley will examine what the
government should do or not do to encourage this start-up
commercial space industry. She will give her predictions on how
the industry will look in five to 10 years.
The history of success in the commercial space arena has
been spotty at best. Today, I want to see how the government
can be an enabler rather than a hindrance to this important,
high technology industry. I am proud of the bill that this
committee was able to get enacted last year, the Commercial
Space Launch Amendments Act, which Congressman Rohrabacher
worked very hard to get passed. This committee has had a
history of interest in the commercial space industry, and I
plan to continue that interest. I am hoping that we will glean
information today that will be valuable as we put together our
NASA authorization in the very near future.
I look forward to working with the new Administration, Mike
Griffin, on this objective. I look forward to hearing from our
witnesses today on this very important topic.
[The prepared statement of Chairman Calvert follows:]
Prepared Statement of Chairman Ken Calvert
In today's hearing, we are going to examine the future of the
commercial space market. We are going to have two panels. The first
will examine the success of the world's first private effort to launch
a person into space and to launch the hopes of our nascent commercial
space industry that may lead to a robust market for space tourism.
Burt Rutan's SpaceShipOne is a manned, reusable launch vehicle that
has successfully flown twice in two weeks carrying the equivalent of
three people. Last October his team won the privately-funded $10
million X-Prize for the development of the first private, manned
spacecraft to exceed an altitude of 100 km twice in two weeks, and last
night, the team was awarded the 2005 Collier Trophy, an annual award
that recognizes those that have made the most significant achievement
in the advancement of aviation.
Joining Mr. Rutan on this first panel will be Mr. Will Whitehorn,
President of Virgin Galactic. Virgin Galactic will be buying the
inaugural ``fleet'' of up to five of the derivative vehicles of
SpaceShipOne, named SpaceShipTwo. We are very interested in hearing
when Virgin Galactic plans to take ownership and when they expect to be
flying tourists into sub-orbital space.
On the second panel, we have Mr. Elon Musk, CEO of Space
Exploration Technologies or SpaceX. I was most impressed with the work
that his folks were doing when I toured his facility recently in El
Segundo, CA. His company is developing a new family of launch
vehicles--the Falcon. He will offer his insights on his business plan
and how he intends to emerge as a success in this commercial space
business.
Also, on the panel will be Mr. John Vinter, the Chairman of
International Space Brokers. He will offer guidelines that the
insurance community requires for those start-up companies and how they
must compete with the established aerospace companies for insurance
coverage.
Our third panelist is Mr. Wolfgang Demisch, a preeminent expert and
financial analyst of the aerospace industry. He will address the
outlook for the commercial space launch industry as well as outline
when space is likely to be able to attract classic risk-reward
investors to succeed the ``angel'' investors that we see today.
And finally, Dr. Molly Macauley, Senior Fellow and Director of
Academic Programs at Resources for the Future, will examine what the
government should do or not do to encourage this start-up commercial
space industry. She will also give her predictions on how the industry
will look in five and ten years.
The history of success in the commercial space arena has been
spotty at best. Today, I want to see how the government can be an
enabler, rather than a hindrance to this important, high tech industry.
This committee has had a history of interest in the commercial space
industry and I plan to continue to promote commercial space. I am
hoping that we will glean information today that will be valuable as we
put together our NASA Authorization in the very near future. I look
forward to working with the new NASA Administrator on this objective.
Chairman Calvert. And with that, good morning, Mr. Udall.
You may proceed with your opening statement.
Mr. Udall. Thank you, Mr. Chairman.
And good morning to all of us and all of you that are
assembled here.
I want to welcome the witnesses as well, and particularly
extend my congratulations, as did Mr. Calvert, to Mr. Rutan and
his team on winning the Collier Trophy for their efforts on
SpaceShipOne. This is a very prestigious and well-deserved
award, and it puts Mr. Rutan in distinguished company,
including Orville Wright, the crew of Apollo 11 lunar mission,
and of course Mr. Rutan himself, because I just recently
learned that you won the award back in 1986 as well. So
congratulations. These are impressive accomplishments, and I
think I speak for all of us when I say we consider you a real
national asset. And we all hope you keep working and designing
for many years yet to come.
Mr. Chairman, as you know, Congress, and this committee in
particular, has long had a strong interest in promoting the
growth of a healthy, robust commercial space sector.
Over the years, there have been some notable successes,
such as the development of the Nation's commercial satellite
communications industry.
There have also been some setbacks.
For example, the very optimistic projections made in the
1980's for the emergence of manufacturing in space, solar power
satellites, and so forth, have not been realized.
And finally, there are the commercial space transportation
and commercial satellite remote sensing industries. These are
industries in which there has been growth over the years as
well as the promise of exciting new applications and markets on
the horizon.
At the same time, the current reality is that both of these
industries depend significantly on government contracts to
maintain their viability.
While the primary focus of today's hearing is on emerging
commercial space transportation initiatives, I hope that the
witnesses will share their thoughts on the broader issues
facing all commercial space companies, whether they be
entrepreneurial start-ups or established companies fighting for
market share.
The question, for example, of what helps determine whether
a potential commercial space activity succeeds or fails, and
what should government be doing, as the Chairman mentioned, and
equally important, what should government refrain from doing if
it wants to promote a healthy commercial space sector.
In that regard, I have received some written testimony
submitted by one of the commercial remote sensing companies,
DigitalGlobe, that addresses some of those broader issues. Mr.
Chairman, I would ask unanimous consent that it be entered into
the record of this hearing. (See Appendix 2: Additional
Material for the Record, p. 84.)
Chairman Calvert. Without objection, so ordered.
Mr. Udall. And I want to thank you for convening this
hearing, and I look forward to hearing from the witnesses
today.
Thank you.
[The prepared statement of Mr. Udall follows:]
Prepared Statement of Representative Mark Udall
Good morning. I want to join the Chairman in welcoming the
witnesses to today's hearing. And I would also like to extend my
congratulations to Mr. Rutan and his team on winning the Collier Trophy
for their efforts on Spaceship One.
Mr. Rutan, that is a very prestigious and well deserved award, and
it puts you in very distinguished company, including Orville Wright,
the crew of the Apollo 11 lunar mission. . .and of course Burt Rutan. .
.because as I recently learned, you had already won the Collier trophy
for the first time back in 1986.
That's a very impressive accomplishment, and I consider you a real
national asset--I hope you keep working and designing for many years to
come.
Mr. Chairman, as you know, Congress--and this committee in
particular--has long had a strong interest in promoting the growth of a
healthy, robust commercial space sector.
Over the years, there have been some notable successes, such as the
development of Nation's commercial satellite communications industry.
There have also been some setbacks.
For example, the very optimistic projections made in the 1980s for
the emergence of manufacturing in space, solar power satellites, and so
forth, have not been realized.
And finally, there are the commercial space transportation and
commercial satellite remote sensing industries.
Those are industries in which there has been growth over the years,
as well as the promise of exciting new applications and markets on the
horizon.
At the same time, the current reality is that both of these
industries depend significantly on government contracts to maintain
their viability. . .
While the primary focus of today's hearing is on emerging
commercial space transportation initiatives, I hope that the witnesses
will share their thoughts on the broader issues facing all commercial
space companies--whether they be entrepreneurial startups or
established companies fighting for market share.
That is, what helps determine whether a potential commercial space
activity succeeds or fails? What should government be doing--and
equally importantly--what should government refrain from doing if it
wants to promote a healthy commercial space sector?
In that regard, I have received some written testimony submitted by
one of commercial remote sensing companies--DigitalGlobe--that
addresses some of those broader issues.
I would like to ask unanimous consent that it be entered into the
record of this hearing. Well, Mr. Chairman, we have a wide range of
issues to consider, and I look forward to getting the perspectives of
today's witnesses. Thank you, and I yield back the balance of my time.
Chairman Calvert. I thank the gentleman.
And we are joined by Mr. Rohrabacher, the former Chairman
of this subcommittee. Do you have any short comment? I would
comment that what he is drinking there, ladies and gentlemen,
is the energy drink. It is----
Mr. Rohrabacher. This is not beer.
I figured that your leadership, Mr. Chairman, would
energize me, but just in case, I brought Red Bull.
Chairman Calvert. Well, it is appropriate that--at this
hearing that you have wings. So----
Mr. Rohrabacher. All right.
Chairman Calvert. Without objection, the additional
statements of other Members will be put in the written record
so we can get right to the testimony.
Hearing no objection, so ordered.
[The prepared statement of Ms. Jackson Lee follows:]
Prepared Statement of Representative Sheila Jackson Lee
Chairman Calvert, Ranking Member Udall,
I want to thank you for organizing this important Subcommittee
hearing to discuss the Future Markets for Commercial Space. This is one
of those topics where we realize the future we only read about is not
too far from reality. Commercial space encompasses a number of
different issues, some which are still be developed and others that
have been an integral part of our lives for quite a while now. The only
way to advance our prospects in this field is to invest in R&D and put
our knowledge and skills to use for improving the lives of people.
Space tourism is a subject that seems like science fiction, but in
fact that fiction is now close to being reality. SpaceShipOne, the
world's first privately-built and human-piloted spacecraft built by
Burt Rutan shows that individuals can indeed take part in space
exploration. Rutan's ship was the first to fly to an altitude of more
than 100 kilometers, completing the feat twice in two weeks. Now,
Virgin Galactic has announced plans to buy a fleet of spacecraft based
on SpaceShipOne's design to carry tourists into sub-orbital space.
Clearly, the future is upon us, but realistically it will be many years
before regular flights into space for individuals will be possible.
Before we get to that stage, it is vital that we discuss all aspects of
what this kind of space exploration will entail.
First among our priorities must be the issue of safety for those
who would take part in such flights to space. In discussing NASA I have
long said that safety must be the first priority, now with the prospect
of average citizens being propelled into space the issue of safety is
even more paramount. I would suggest that a separate commission be
organized to discuss the safety parameters that would need to be in
place to make it feasible for average citizens to enter space. Clearly,
as time goes on so will the technology that will steadily allow people
to gain even greater access to space exploration than is being proposed
by Virgin Galactic. In accordance, guidelines and regulations must be
put in place to meet the risks associated with such travel. We may be
entering a new era in individual travel, but just like the passenger
airplane before it we must ensure the safety of all passengers.
In regards to space tourism, it is also my belief that such travel
should not be restricted to only the wealthy. Clearly, these businesses
make large investments to startup such a complex operation and
therefore huge fees must be generated to make up the costs. However,
those who have a passion for space exploration; especially students
should at least have a chance to experience space exploration. Of
course, this could not be open to everyone, but even allowing a few
individuals with lower means but high motivation to take part would be
a wise investment. I believe in the long run this will be good for
business and good for the science of space exploration because it will
only increase the general public's interest in space. We must inspire a
new generation to want to literally reach the stars, and with our new
generation of technology this dream is more possible.
Commercial space has long yielded great dividends in the technology
of satellites. In today's world we would be lost and confused without
the aid of these stations in space. However, new technology must emerge
and the ability for more businesses to use satellite technology must be
enhanced. Lowering the cost of producing and launching commercial
satellites would go a long way in bringing new business and therefore
new revenue streams in to the fold. Together with space tourism, the
future of commercial space is bright, but we can not relent in our
pursuit of continued development. Only when we continue to push the
boundaries of discovery do we yield innovations that affect the lives
of everyday people.
Chairman Calvert. I ask unanimous consent to insert, at the
appropriate place in the record, the background memorandum
prepared by the majority staff for this hearing.
Hearing no objections, so ordered.
Today, we will begin with our first panel: Mr. Rutan and
Mr. Whitehorn.
Mr. Rutan, thank you for attending, and you may begin. You
might--turn your mike on there. That little green button.
Panel I:
STATEMENT OF MR. BURT RUTAN, SCALED COMPOSITES, LLC
Mr. Rutan. Okay. Thank you very much for the opportunity to
address the hearing.
I will attempt to specifically answer the questions that
showed up in the invitation.
I want to first point out that I will use the words
``personal space flight'' here. We tend to use that nowadays
instead of ``space tourism.'' And personal space flight is just
access to flight above the atmosphere by the public, generally
inferred that it is a commercial, revenue-like business.
I think the markets for personal space flight will take on
two basic scenarios. The first is one in which commercial
companies develop lower-cost versions of the classic government
booster and spacecraft concepts and then conduct commercial
flights that are funded by passenger ticket sales. This
activity might properly be compared to trekking outfits that
take courageous adventurers to the top of Mount Everest. That
activity survives today even though more than nine percent of
those who have reached the summit have died on the mountain and
with the recent rate still at four percent. The safety record
for all of government manned space flight is hardly better;
four percent fatality rate for those who have flown above the
atmosphere, and the fatality rate for government space flight
for the last 20 years has been much worse than it was for the
first 20 years.
This first scenario's approach will result in, I think, a
very limited market whose size will depend somewhat on the
ticket prices. However, I do not believe this scenario will
result in significant volume of operations, being limited by
the same factors that limit the Mount Everest climbers. I
believe these systems might begin commercial flight in four to
six years, flying maybe 50 to 100 astronauts the first year,
and I think the rate will top out at maybe 300 to 500 people
per year.
The second scenario is quite different. It is a scenario in
which the players do not find the dangers of space flight
acceptable. They recognize that extensive improvements in
safety are more important than extensive improvements in
affordability. Those that attack the problem from this
viewpoint will be faced with a much greater technical
challenge: the need for new innovations and breakthroughs. If
successful, however, they will enjoy an enormous market, not
one that is limited to servicing only a few courageous
adventurers. It is likely that systems that come out of this
approach will be more like airplanes and will operate more like
airplanes than the historic systems that are used for
government manned space flight.
The future plans for my company regarding the new industry
can not be revealed since they are only at a preliminary stage
of technical development. They are not fixed--excuse me.
Chairman Calvert. I apologize.
Mr. Rutan. No problem.
Chairman Calvert. They will go off in a second.
Mr. Rutan. They are not fixed in business deals and, in
general, the--when we approach these sort of things, we don't
talk about them in the early years. So we are not ready to put
out, in a public forum, the--any details on our plans. I could
share that with you privately, but not publicly.
I can assure you, however, that our plans do involve this--
do not involve the scenario one approach. Since we believe a
proper goal for safety is the record that was achieved during
the first five years of commercial scheduled airline service
started in 1927. The first five years of commercial airline
service, while exposing passengers to risks that were high by
today's standards, were more than 100 times as safe as
government manned space flight. Achieving that goal requires
new generic concepts, ones that will come from true research,
not development programs like the ones we are seeing with
NASA's exploration plans.
I can tell you that we do not yet have the breakthroughs
that can promise adequate safety and costs for manned orbital
flights. That is why our early focus will be on the sub-orbital
personal space flight industry. Our recent SpaceShipOne
research program did focus on the needs for safety
breakthroughs by providing an air-launched operation in which
the rocket propulsion is not safety critical and the ``carefree
re-entry'' concept assures that flight control is not safety
critical for atmospheric entry. Those are biggies, and those
are the things that allow us to move into a commercial industry
in the short-term.
Another thing I can tell you is that our systems for the
commercial private space flight industry will be focused on an
early marketplace with multiple, competing spaceline operators
in order to bring the experience to the largest possible
audience. The airline experience has shown us that it is not
just technology that provides safety, but the maturity that
comes from a high level of flight activity. Airline safety
increased by a factor of six within the first five years
without an accompanying technology increase.
I am not able to reveal the schedule for the introduction
of our commercial systems. However, I believe that once revenue
business begins with these new systems, it will likely fly as
many as 500 astronauts the first year, by the fifth year, the
rate will increase to about 3,000 astronauts per year, and by
the twelfth year of operations, at least 50,000, maybe 100,000
astronauts will have enjoyed that black sky view from sub-
orbital flight.
Now that it has been shown that a small private company can
indeed conduct robust, sub-orbital manned flights with an
acceptable recurring cost, I do not believe that this industry
will again be hampered by the inability to raise capital. The
size of the potential market supports significant investment.
The main barrier has been the perceived risk that the technical
problems weren't solvable. Those that develop systems that have
generic features that point to poor safety will continue to
have trouble finding capital, as they should. Our ability to
find funding for our research program, the one that we
completed last year, was certainly tied to the fact that we had
a goal of not just to fly in space, but to fly a system that
could be immediately developed for the commercial market. We
have had no problem finding investors for our future program, a
program that involves the development and certification of
commercial sub-orbital spaceships.
I believe the ability to insure will be greatly improved if
the government steps up to the responsibility to require an
operator to show his passenger safety by adequate flight and
ground testing. Clearly, insurance will be expensive until it
is shown that the aggressive safety goals are indeed being
achieved. With maturity, that safety will continuously improve,
as it did with airliners.
Over the last 33 years, my companies have developed 39
different manned aircraft types. All were developed via
research flight tests flown over our California desert area,
and all flights were regulated by the FAA-AVR, which is now--
the airplane folk are who I am talking about, now AVS. We have
never injured a test pilot nor put the non-involved public or
their property at risk. In spite of that record, the FAA
insisted that the Office of Commercial Space Transportation,
AST, impose their commercial launch license process on our last
five flights of our 88-flight research-only test program. That
would have been fine, except that their process bore no
relation to that historically used for research testing.
The AST process, focusing only on the non-involved public,
just about ruined my program. It resulted in cost overruns. It
increased the risk for my test pilots. It did not reduce the
risk to the non-involved public. It destroyed our safety policy
of always question the product, never defend it. And under AST,
it removed the opportunities for us to seek new innovative
safety solutions. The main reason for this is that AST, with
their history of only regulating the dangerous scenario one
type of systems, applied the process of protecting only the
non-involved and had no process to deal with the safety and
prediction of failure for manned aircraft. Their process deals
primarily with the consequence of failure, where the airplane
folk, their regulatory process deals with reducing the
probability of failure.
The regulatory process was grossly misapplied for our
research tests, and worse yet is likely to be misapplied for
the regulation of future commercial spaceliners. The most
dangerous misapplication might be stifling innovation by
imposing standards and design guidelines rather than the
aircraft certification process that involves requiring a
manufacturer to test to show his safety margins. AST has
already used NASA and AIAA to develop design guidelines. This
is an approach that must not be imposed on an industry that is
still doing basic research. The AST launch license process
might be applicable for the protection of those on the ground
during flights of scenario one-like systems, but it will not
work for the portion of the industry that promises growth and
sustainability.
Time here does not allow me to elaborate on that, but I do
have it included in my handout.
The basic problem faced by the FAA in dealing with the
regulatory tasks ahead is funding for hiring staff that are
familiar with aircraft certification and aircraft commercial
operations. The FAA Administrator has told me that she is 300
people short needed for the current demands in regulating
aircraft, thus it is impossible to shift the job of regulation
of spacecraft, like mine, to the aircraft organization. I think
it needs to be shifted to people who know how to regulate the
systems that are being developed.
This problem must be solved quickly to support an industry
that needs a proper research environment to allow innovation.
The problem can not be solved by adding staff at AST, since
having more people applying the wrong process is not the
answer. I believe they are over-staffed now to do the current
launch license process. Much of the work done in an attempt to
misapply the expendable booster process to our aircraft was
repeated numerous times with a staff that were not equipped to
make relatively easy decisions and incapable of applying the
needed waiver process. In fact, while my company was already
flying initial test flights and waiting for time-critical
responses from AST during 2003 and 2004, AST found time to
expend extensive resources processing and awarding a launch
license to a company that did not even have a vehicle in
construction, nor even funding for the program.
We have spent considerable resources developing
recommendations for specific regulatory processes to be applied
to the new industry, that is a streamlined like certification
for these new commercial spaceships, but we have not yet found
interest within the FAA to consider them. We will continue our
work to solve this problem and will hope to make progress
within the next two years.
I want to point out also, this sub-orbital space tourism
industry has been criticized by some as, well, this is just
joyrides for billionaires and that--what is this all about? It
is about fun. I want to tell this group that I am not at all
embarrassed that we are opening up a new industry that will
likely be a multi-billion-dollar industry that is focused only
on fun. I want to remind you, I--when we bought personal
computers in the late '70s, a lot of people--you know, many
thousands of people bought these things, and what were they
for? Balancing our checkbook? Well, in general, they were for
fun. The vast majority of uses on them were to play games. And
the fact that it expanded as an industry and of something that
we really didn't know what they were for, it left it wide open
for somebody like Al Gore to come along and invent the
Internet. And then, all of a sudden, the fact that it is out
there, all of a sudden now here is an application, and the
application is now our communication, it is our commerce, it is
our, essentially, everything. And that was an industry in which
the product was sold for a full decade just for fun. And I
believe this is going to happen with space flying, also. I am
not embarrassed that the first decade of personal space flight
will be for nothing but fun. But I am confident that when there
are 50,000 people that have left the atmosphere, and when there
is a lot of capital investment on it, because it is profitable,
all of a sudden we will get out there and we will solve the
reasons to make it also safe to go to orbit and to go to the
moon. And we will also find out new uses for it. There will be
somebody that comes along and invent an Internet-like reason
for changing this fun into something that is long lasting and
significant for our Nation.
Thank you.
[The prepared statement of Mr. Rutan follows:]
Prepared Statement of Burt Rutan
Thank you for the invitation to address this important hearing. I
will attempt to specifically address the subjects outlined in the
invitation.
The markets for a future Personal Space Flight industry (access to
flight above the atmosphere by the public) will likely take on two
basic forms: The first is a scenario in which commercial companies
develop lower-cost versions of the classic government booster and
spacecraft concepts and then conduct commercial flights that are funded
by passenger ticket sales. This activity might properly be compared to
the trekking outfits that take courageous adventurers to the top of
Mount Everest; the activity survives even though more than nine percent
of those who have reached the summit have died on the mountain, with
the recent rate still at four percent. The safety record for all of
government manned space flight is hardly better; four percent fatality
for those who have flown above the atmosphere, and the fatality rate
for the last 20 years being much worse than the first 20 years. This
first scenario's approach will result in a very limited market whose
size will depend somewhat on the ticket prices. However, I do not
believe this scenario will result in a significant volume of
operations, being limited by the same factors that limit the Everest
climbers. I believe these systems might begin commercial flights in
four to six years flying maybe 50 to 100 astronauts the first year with
the rate topping out at maybe 300 to 500 per year.
The second is a scenario in which the players do not find the
dangers of space flight acceptable and recognize that extensive
improvements in safety are more important than extensive improvements
in affordability. Those that attack the problem from this viewpoint
will be faced with a much greater technical challenge; the need for new
innovations and breakthroughs. If successful, however, they will enjoy
an enormous market, not one that is limited to servicing only a few
courageous adventurers. It is likely that systems that come from this
approach will be more like airplanes and will operate more like
airplanes than the historic systems used for government manned space
flight.
The future plans for my company regarding the new industry cannot
be revealed since they are only at a preliminary stage of technical
development. I can assure you that they do not involve a `scenario one'
approach, since we believe a proper goal for safety is the record that
was achieved during the first five years of commercial scheduled
airline service which, while exposing the passengers to high risks by
today's standards, was more than 100 times as safe as government manned
space flight. Achieving that goal requires new generic concepts; ones
that will come from true research, not merely development programs like
the ones we are seeing with NASA's exploration plans.
I can tell you that we do not yet have the breakthroughs that can
promise adequate safety and cost for manned orbital flights. That is
why our early focus will be on the sub-orbital Personal Space Flight
industry. Our recent SpaceShipOne research program did focus on the
needs for safety breakthroughs by providing an air-launched operation
in which the rocket propulsion is not safety critical and the `care-
free re-entry' concept assures that flight control is not safety
critical for atmospheric entry.
Another thing I can tell you is that our systems for the commercial
Private Space Flight industry will be focused on an early marketplace
with multiple, competing spaceline operators in order to bring the
experience to the largest possible audience. The airline experience has
shown us that it is not just technology that provides safety, but the
maturity that comes from a high level of flight activity. Airline
safety increased by a factor of six within the first five years without
an accompanying technology increase. I am not able to reveal the
schedule for the introduction of our commercial systems. However, I
believe that once the revenue business begins it will likely fly as
many as 500 astronauts the first year. By the fifth year the rate will
increase to about 3,000 astronauts per year and by the twelfth year of
operations 50,000 to 100,000 astronauts will have enjoyed that black
sky view.
Now that it has been shown that a small private company can indeed
conduct robust, sub-orbital manned flights with an acceptable recurring
cost, I do not believe that this industry will again be hampered by the
inability to raise capital. The size of the potential market supports
significant investment. The main barrier had been the perceived risk
that the technical problems were not solvable. Those that develop
systems that have generic features that point to poor safety will
continue to have trouble finding capital, as they should. Our ability
to find funding for our research program was certainly tied to the fact
that we had a goal of not just to fly, but to fly a system that could
immediately be developed for the commercial market. We have had no
problem finding investors for our future program that involves the
development and certification of commercial sub-orbital spaceships.
I believe the ability to insure will be greatly improved if the
government steps up to the responsibility to require an operator to
show his passenger safety by adequate flight and ground testing.
Clearly, insurance will be expensive until it is shown that aggressive
safety goals are indeed being achieved. With maturity I expect that
safety will continuously improve, as it did with airliners.
Over the last 33 years my companies have developed 39 different
manned aircraft types. All were developed via research flight tests
flown over our California desert area and all flights were regulated by
the FAA-AVR (the airplane folk, now AVS). We have never injured a test
pilot, nor put the non-involved public or their property at risk. In
spite of that record, the FAA insisted that the Office of Commercial
Space Transportation (AST) impose their commercial launch license
process on the last five flights of our 88-flight research test
program. That would have been fine, except that their process bore no
relation to that historically used for research testing. The AST
process, focusing only on the non-involved public, just about ruined my
program. It resulted in cost overruns, increased the risk for my test
pilots, did not reduce the risk to the non-involved public, destroyed
our ``always question, never defend'' safety policy, and removed our
opportunities to seek new innovative safety solutions. The main reason
for this is that AST, with their history of only regulating the
dangerous `scenario one' type of systems, applied the process of
protecting only the non-involved and had no process to deal with the
safety and prediction of failure for manned aircraft. Their process
deals primarily with the consequence of failure, where the aircraft
regulatory process deals with reducing the probability of failure. The
regulatory process was grossly misapplied for our research tests, and
worse-yet is likely to be misapplied for the regulation of the future
commercial spaceliners. The most dangerous misapplication might be
stifling innovation by imposing standards and design guidelines, rather
than the aircraft certification process that involves testing to show
safety margins. AST has already used NASA and AIAA to develop design
guidelines. This is an approach that must not be imposed on an industry
that is still doing research. The AST launch license process might be
applicable for the protection of those on the ground during flights of
``scenario one'' systems, but it will not work for the portion of the
industry that promises growth and sustainability. Time here does not
allow elaboration, so I must refer you to the handout.
A basic problem faced by the FAA in dealing with the regulatory
tasks ahead is funding for hiring staff familiar with aircraft
certification and commercial operations. The Administrator has told me
that she is 300 short in staff needed for the current demands in
regulating aircraft, thus it is impossible to shift the job of
regulation of spacecraft like mine for ``scenario two'' to the aircraft
organization (AVS) who will know how to regulate the systems being
developed. This problem must be solved quickly to support an industry
that needs a proper research test environment to allow innovation. The
problem cannot be solved by adding staff at AST, since having more
people applying the wrong processes is not the answer. I believe that
they are over staffed, to do the current launch license process. Much
of the work done in an attempt to misapply the expendable-booster
process to our aircraft was repeated numerous times with a staff that
were not equipped to make relatively easy decisions and incapable of
applying the needed waiver process. In fact, while my company was
already flying initial test flights and waiting for time-critical
responses from AST, during 2003 and 2004, AST found time to expend
extensive resources processing and awarding a launch license to a
company that did not even have a vehicle in construction, or even
funding for the project!
We have spent considerable resources developing recommendations for
specific regulatory processes to be applied to the new industry, but
have not yet found interest within the FAA to consider them. We will
continue our work to solve this problem and will hope to make progress
within the next two years.
Thank you for your attention to my opening remarks. I will be happy
to answer your questions.
Regulation of Manned Sub-orbital Space Systems
for Research and Commercial Operations
A summary prepared by Burt Rutan, Scaled Composites
Safety Requirements for the Private Spaceline Industry
New generic solutions for safety as compared to
historic Government manned space operations will be mandatory
Cannot run a Spaceline without a huge reduction of
current risk
Safety Goals: Airline experience as a model
Risk statistics, fatal risk per flight
First 44 years of manned space flight = one
per 62 flights
First airliners (1927 & 1928) = one per 5,500
flights
Early airliners (1934 to 1936) = one per
31,000 flights
Current airliners = one per two to five
million flights
Modern military fighters = one mishap per
33,000 flights
Logical goal:
Better than the first airliners
< one percent of the historic government
space flight risk
Different Systems Need Different Regulation Methods
The AST Process
To show that the consequence of failure,
i.e., the expectation of casualty (Ec) for the non-
involved public (NIP) is low.
Deals with systems that are historically
dangerous.
The AVR (now AVS) Process
To show that the probability of failure (Pf)
is low.
Assures safety of crew and passengers.
Deals with systems that need to be reliable.
The risk method approach by AST
Risk is product of failure probability and
consequence.
NIP risk with dangerous systems is assured
only by selection of flight area.
Flight crew risk with dangerous systems can
be addressed only by flight termination staging.
However, since Pf cannot be calculated for
immature systems, AST has no acceptable process for new
systems that have to be safe enough for commercial
passenger service.
AST Methods for Booster-like systems
Computer-flown or remote operation
Automation that requires backup via flight-
termination systems
Ground-launched
Safety-critical rocket propulsion
Un-piloted stages dropped
High-scatter landing
AVR Methods for Aircraft-like systems
Human Piloted flight
Expendable-like flight-termination systems
are not appropriate
Runway takeoff
Rocket propulsion not safety critical
No ``bombing'' of hardware that presents risk
to NIP
Horizontal aircraft-like runway recovery
If the safety approach is based on failure
consequence it should be regulated by AST.
If the safety approach is based on failure
probability it should be regulated by AVR or by staff
experienced in aircraft safety assurance.
If safety is based on both consequence and vehicle
reliability, then consequence should be calculated by AST, but
Pf must be accessed by those with aircraft safety regulation
experience.
Experimental Research Testing of Airplane-like Systems
Cannot be addressed by enforcing standards or
guidelines--the important need is to allow innovation; to seek
safety breakthroughs without regulatory hurdles. Regulators
must not be expected to appreciate this need during a research
test environment.
Pf cannot be calculated, thus historic data must be a
guide for approval of an adequate test area to meet Ec intent
for NIP.
Environmental requirements, like for aircraft are not
needed, but they can be tolerated, with costs not the full
burden of the developer.
The AVR waiver method for all regulations is
mandatory. The developer must be able to argue the equivalent
safety justification for non-compliance to any regulation. This
is critical, especially for an immature industry with
indeterminate technical issues.
The AST launch licensing process is not acceptable
due to its costs, its hindrance of innovation and its negative
effect on safety policy. The AVR-EAC (Experimental
Airworthiness Certificate) method works and must be
implemented. The system is based on respect for a developer's
safety record and the expectation that he will follow the
license rules.
Certification, or Licensing Spacecraft for Commercial Sub-orbital
Passenger Operations
The manufacturer and the operator cannot accept a
scenario in which the FAA has no role in approving the safety
of crews or passengers. His responsibility to do adequate
testing to assure passenger safety must have acceptance by the
FAA. Otherwise he has no unbiased defense at trial following an
accident.
Part 23 & 25 Certification are based on defining
conformity. Then, by test and analysis showing adequate margins
for the conformed vehicle. Subsequently the holder of the
certificate can then produce and operate unlimited numbers of
vehicles that conform. The main costs of certification are the
issues related to conformity, not the specific tests to show
margins.
Any ethical manufacturer or operator must test to
show margins, even in the absence of any government regulation.
However, initially the manufacturer and operator will
build and operate only a very small number of vehicles, thus
making the detailed conformity process debilitating. Also, the
intensity of the process would interfere with the need to solve
new technical problems and to maintain a ``question, never
defend'' posture while system technical status is not mature.
Our proposal: an applicant seeking approval to fly
passengers will be required to define the tests needed to show
adequate margins for his design and define the required systems
safety analysis. He must then obtain acceptance of the test
plan by FAA regulators and later get acceptance that the tests
were satisfactorily completed. The process will be design
specific and repeated for each flight article.
Conformity of the design, the tools, the systems or
the manufacturing process will not be required.
A manufacturer can select the conformity process as
an option if he desires to avoid the individual tests of each
production article.
Conformity may be mandatory after the industry
matures (the aircraft certification process).
Lessons from the Regulatory Process During the SpaceShipOne (SS1)
Research Flight Tests
The Tier1 test program involved 88 flights, 17 for
the SS1 and 71 for the White Knight. 83 of those flights were
licensed via an AVR-AIR-200 Experimental Airworthiness
Certificate. Those flights were done under the authority of the
EAC and directed via the information in its Operating
Limitations list. The EAC was in effect for the duration of the
program, July 2002 to October 2004.
Five flights of SS1 were flown under the additional
authority of an AST Launch License. License was in effect from
March 2004 to October 2004.
The 83 flights flown under the EAC involved the
highest risk, both to the pilots and the NIP: first flights of
unproven vehicles and nearly all envelope expansion, including
first supersonic flight of SS1 to max-q.
The EAC flights were regulated similar to the 1,800
research flights conducted by Scaled on 36 aircraft types over
a 30-year period: we were expected to fly within the Ops Limits
list, and were trusted to do so. The program allowed the
innovation always present in aircraft research, and did not
interfere with our `question, never defend' safety policy.
Development of the new safety innovations were done
under the EAC: the new type hybrid rocket motor, the air launch
and the `care-free re-entry' feathered concept.
The EAC process provided an efficient environment for
exploratory testing and continued the historic research
aircraft record of safety for the NIP.
The AST Launch License process enforced on the
remaining five flights of SS1 was a very different regulatory
environment. We were assured streamlining from the
certifications needed for commercial operations approvals but
were kept in the dark on specifics. The process involved a 15
month, three party Ec analysis that failed to arrive at an
adequate calculation for Pf, thus rendering the Ec
determination to be useless. The process was misguided and
inappropriate, at times resembling a type certification effort
and left the applicant without the basic information needed to
determine status. The regulators requested Ec analysis, then
ignored those results without informing the applicant or
allowing him to defend, to revise or to resubmit the data. The
regulators refused to reveal the government's analysis method
for Ec calculation. The `shell game' continued for the majority
of the program, resulting in a severe distraction to key test
personnel as well as high costs and a disregard for our safety
policy. The environment also precluded innovation.
The Launch License process, as applied to the
aircraft research test environment resulted in increased risk
for our flight crews, the very people that bear the true risk
in experimental flight tests.
The AST office had no waiver policy, and answered our
requests by a written denial from the Administrator without
giving the applicant the opportunity to debate or negotiate the
technical merits or to get an opinion from the EAC's regulatory
staff.
Conclusions
An applicant for approval to fly research flight
tests of piloted, aircraft-like systems must have a defined
process, one that allows him to plan his program staffing and
financial needs. It is not acceptable to impose undefined,
inappropriate forced oversight. The specific EAC process has
served the industry well for decades and should be used and
enforced by regulators familiar with research aircraft testing.
The Ec process, developed for protection of
population from the dangers of ground-launched, expendable
rocket boosters, is not workable for application to piloted,
aircraft-like systems during research tests and must be
replaced by the AVR method of having test-experienced
regulators select an appropriate flight test area for research
tests. The Ec process might be justifiable for commercial
operations, but it must be regulated by those experienced with
commercial aircraft operations.
Regarding licenses to conduct commercial flights that
carry revenue passengers, it is not acceptable for FAA to
ignore the approval or acceptance of the vehicle's ability to
safely fly people. Regulation must be done by experienced
(aircraft experienced) staff.
The acceptance of the system's probable safety can be
done via a vehicle-specific test requirement process for
structures and safety analysis for systems, rather than the
more expensive Type Certification process that includes full
conformity assurance. These processes cannot be defined in
advance by specification of standards or by design guidelines,
since every new system will have unique features. The testing
details and systems safety analysis process must be specific to
the vehicle and its intended operation. This process does not
have to be significantly more expensive than that which would
be done by any ethical manufacturer in the absence of
government regulation.
Biography for Burt Rutan
Burt Rutan was born in 1943. He received his Bachelor of Science
degree in Aeronautical Engineering at California Polytechnic University
in 1965. His education includes the Space Technology Institute at Cal
Tech and the Aerospace Research Pilot's School at Edwards Air Force
Base. Mr. Rutan holds, in addition, the honorary degree of Doctor of
Science from California Polytechnic State University, San Luis Obispo,
June 1987; Doctoral of Science, honoris causa, from Daniel Webster
College, May 1987; Doctoral of Humanities, honoris causa, from Lewis
University, May 1988 and Doctorate of Technology, honoris causa, from
Delft University of Technology, January 1990.
Mr. Rutan worked for the U.S. Air Force from 1965 until 1972 as
Flight Test Project Engineer at Edwards Air Force Base, California. His
projects ranged from fighter spin tests to the XC-142 VSTOL transport.
In March 1972, Mr. Rutan became Director of the Bede Test Center
for Bede Aircraft in Newton, Kansas.
In June of 1974, at Mojave, California, Mr. Rutan formed the Rutan
Aircraft Factory (RAF) to develop light homebuilt aircraft. Through
this company, the VariViggen, VariEze, NASA AD-1, Quickie, Defiant,
Long-EZ, Grizzly, scaled NGT trainer, Solitaire, Catbird, and the
world-flight Voyager aircraft were developed.
In April 1982, Mr. Rutan founded Scaled Composites (Scaled) to
develop research aircraft. Since its founding, Scaled has been the
world's most productive aerospace prototype development company,
developing new aircraft types at a rate of one each year. Past projects
include the 85 percent scale Starship 1 for Beech Aircraft Corporation,
the Predator agricultural aircraft for ATAC, the Scarab Model 324
reconnaissance drone for Teledyne Ryan Aeronautical, the Advanced
Technology Tactical Transport (ATTT) for DARPA, the 1988 America's Cup
wing sail, the Triumph light executive jet for Beechcraft, the ARES
close air support attack turbofan, the Pond Racer, the Pegasus Space
launch vehicle flying surfaces, the Model 191 general aviation single
for Toyota, a 40 percent scale B-2 bomber RCS model, General Motor's
1992 show car (the GM Ultralite), the Bell Eagle Eye prototype tilt
rotor RPV, the Earthwinds pressurized gondola, the McDonnell Douglas
DC-X single stage rocket structure, the VisionAire Vantage business
jet, the Raptor and Raptor D-2 high altitude RPVs for BMDO, a 40-meter
wind generator for Zond, three NASA X-38 crew return vehicles, the
Williams, International V-Jet II, the high-altitude Proteus aircraft,
the Adam Model 309 business aircraft, and the Rotary Rocket Roton
atmospheric test vehicle. Recent projects include the White Knight and
SpaceShipOne. On 21 June 2004, with Mike Melvill at the controls, SS1
flew history's first private manned space flight. On 4 Oct 2004, SS1
won the $10M X-Prize (two flights within five days flown by Melvill and
Brian Binnie). The Virgin Atlantic GlobalFlyer designed and built at
Scaled made its maiden flight in March 2004 and a record setting solo
world flight in March 2005.
A few of the awards which Mr. Rutan has received include:
EAA Outstanding New Design, 1975, 1976 and 1978.
Presidential Citizen's Medal presented by Ronald
Reagan, December 29, 1986.
Grand Medal of the Aero Club of France, January 29,
1987.
National Medal of the Aero Club of France, January
29, 1987.
Society of Experimental Test Pilots, 1987 J.J.
Doolittle Award and 2004 J.J. Doolittle Award.
Royal Aeronautical Society, British Gold Medal for
Aeronautics, December 1987.
Design News Engineer of the Year for 1988.
Western Reserve Aviation Hall of Fame, Meritorious
Service Award, 2 September 1988.
The International Aerospace Hall of Fame Honoree, 24
September 1988.
Member, National Academy of Engineering, 1989.
1987 Robert J. Collier Trophy for ingenious design
and development of the Voyager 15 May 1987 and again on 19
April 2005 for SpaceShipOne.
National Aviation Hall of Fame Honoree, 21 July 1995.
EAA Freedom of Flight Award, 3 August 1996.
EAA Homebuilders Hall of Fame, 23 October 1998.
Designer of the Year, Professional Pilot Magazine, 13
March 1999.
Clarence L. ``Kelly'' Johnson ``Skunk Works'' award
by the Engineers Council, February 2000.
2000 Lindbergh Award by the Lindbergh Foundation, May
20, 2000.
Aviation Week & Space Technology magazine's ``Laurel
Legend'' and Hall of Fame in April 2002, Current Achievement
Award for first privately-funded manned space flight by
SpaceShipOne in April 2005.
Aviation Week & Space Technology magazine's ``100
Stars of Aerospace'' (ranked 29th), June 2003.
Scientific American magazine's ``Business Leader in
Aerospace,'' November 2003.
Time Magazine's ``100 Most Influential People in the
World,'' April 18, 2005.
Chairman Calvert. I thank the gentleman for his excellent
testimony.
That--Mr. Whitehorn, and I apologize, President of Virgin
Galactic, not Virgin Atlantic. I just--it morphed in my mind,
but----
STATEMENT OF MR. WILL WHITEHORN, PRESIDENT, VIRGIN GALACTIC
Mr. Whitehorn. Thank you very much, Chairman Calvert.
Can I first of all start by moving slightly away from my
testimony and express my total agreement with Burt Rutan's last
comment there with regards to the reasons why personal space
flight, as a concept, is incredibly important?
Our belief at Virgin Galactic is that the proof of concept
in creating a profitable business in the private sector without
government funding to take individuals into space to experience
the blackness of space, the curvature of the Earth,
weightlessness, and all of the attendant things that they will
feel and experience during their two-hour trip to space is not
just about fun. It is certainly not all about fun for us. We
see this is as a proof of concept, proof of the idea that it is
possible to develop viable, reusable space systems that can be
safe in their operation.
As a major airline group operating three airlines around
the world, Virgin Atlantic and its sister companies have not
taken lightly the idea of venturing into the personal space
flight market. There has been a lot of handling over the issue
internally, because we have a worldwide brand and a reputation,
and we have a reputation for safety in the commercial airline
industry, which is second to none. In the 20 years we have been
operating, we have not lost a single passenger. We also operate
one of the largest rail networks in Europe operating high
technology tilting trains, which are a new technology to the UK
market. And we carry 50 million passengers a year in that
business, and we haven't had a single accident or incident
involving the death of a passenger on board.
And for us, the principle of entering this is the principle
of proving a concept, proving that something can be done in the
private sector, can be done safely, and through the personal
space flight experience of the pioneers who do pay at the
beginning of this process, we believe within five years we can
create a viable business, which will be profitable, and that
would allow us to bring down the costs of personal space flight
to levels which would be affordable across the board in the
United States and around the world.
I will move on now to talk a little bit about some of the
questions that the Subcommittee put to us. You asked us about a
timetable, and I think my answer to the issue of the timetable
is pretty similar to Burt Rutan's. The timetable for us depends
upon the ability to go through the process of completing the
design of SpaceShipTwo, as we will call it for the purposes of
today, and proving and testing the vehicle. For us, the issues
of coming to a contract with Mr. Rutan's company to build
SpaceShipTwo are bound up in a number of issues of bureaucracy,
which we are not unhappy about. We believe we can cope with
them. We have got the Defense Department and the DDTC to deal
with over the issue of technology transfer. And that is a
process which has to be completed before we can complete the
design work with Burt Rutan's company and move towards a final
contract to construct a fleet of space ships.
But an outline, our view of the issue is that we would like
to order at least five SpaceShipTwos, as we will call it for
the purposes of today, from Mr. Rutan's company, and we would
like to be in operation before the end of this decade. And we
would like to be going through a testing process by the end of
2007 and commercial operation by 2008, if that was possible.
But we can not allow ourselves to be dictated to by a
commercial need. The most important factor for us will be
developing a safe vehicle and operating that vehicle safely.
And if that can be proved, then we believe that we can take the
people into space and the people want to go.
To give you an example of where we believe the marketplace
is for commercial space tourism, we announced the formation of
Virgin Galactic formally before the X-Prize flights last
September, and we, at that state, set up the marketing
operation to market the flights. We have, since we set up, had
29,000 applications to fly. That is 29,000 people who said they
are willing to pay a deposit of up to $20,000 for space flights
within a range of prices of up to $200,000. We have also had
100 people who have actually signed terms and conditions with
us now to pay the full cost of a $200,000 flight up front in
order to fly in SpaceShipTwo, should that be developed.
Clearly, if we fail to develop a viable vehicle, they will get
their money back.
And moving on to some of the other questions that you
asked, and the question of profitability for us is a very
important one. We are not doing this as a rich billionaire's
toy adventure and as a loss leader or just as a grand
representation. We are doing this to create a profitable and
viable business to prove a concept. And we believe that if the
initial work that we have done on the business plan can be met,
that this business can be profitable within five years, and the
cost of space flights could fall by a factor of 75 percent by
the end of that five-year period. And the pioneers, who are
going to be the pioneer astronauts who pay to fly commercially
into space, will help to fund the process of making
commercially viable personal space flight something that people
across the country can enjoy and afford in the future.
And you asked one of the questions about the differences
between acquiring a fleet of commercial spacecraft compared
with the process of buying commercial aircraft in the
commercial airline market and our experience of both. At the
risk of sounding trite, the short answer is that the
differences between the process we are going to undertake with
Burt Rutan's company and buying aircraft from Boeing are chalk
and cheese. We are in uncharted territory here, and it is
relatively easy now, on the basis of an output specification
from an airline, for one of the major manufacturers to provide
one's needs within the parameters of their manufacturing
capability. And the business is highly regulated. We work in a
highly regulated environment in commercial airline operation,
and rightly so.
In this area, the area of personal space flights, we are
going to have to design different ideas as to how we create a
viable vehicle, and we are going to be working very closely
with scale composites to come to a contractual arrangement with
each other, which will work for both parties to ensure that we
get the thing built and we get it operating viably as quickly
as possible. But it will not be like buying aircraft in the
commercial airline market. We are at the experimental cutting
edge of a new industry here, and between the two of us, with
our commercial experience and Burt's experimental aircraft
experience, we are absolutely convinced that we can come up
with something which will be viable and acceptable in terms of
safe operation to the FAA and the other organs of government
who are going to be involved in regulating the venture as it
unfolds.
It is--one of the other questions that you asked was the
question of the space act of last year and issues within that
act, which are important to us and things that the government
can do to help. Frankly, the most important thing to say is we
don't want help from the government. This is an important point
of principle here that the parties undertaking this venture do
it in the private sector and do it off their own back. However,
in a nascent industry like this, enabling by the government is
a very important thing. And I think one feature of the act that
we would like to look at more closely is the issue of the
insurability of this industry. For this industry to be viable,
the commercial personal space flight industry to be viable, it
is important that some of the breaks on insurance and support
from the government in the insurance area are carried through
beyond the current plan of 2008 to 2009 and that when the
government looks at this issue, they do extend the insurance
provisions within the act to cover a longer period of time to
allow this industry to get going with the kind of support it
needs. Because with the support of the government, the
insurability of the third party uninvolved risk is going to be
a much easier thing to undertake.
I think the other thing that the government can help us
with is enabling, enabling the processes that we undertake and
taking an active role in preventing roadblocks on the way. We
believe that the FAA is an organization that is well up to the
job of helping this industry to form and form a safe pattern of
operation. We believe the Defense Department can take its
responsibilities to protect the U.S. public very seriously and
at the same time not hold up this project. We don't see
roadblocks on the way at the moment, but if they appear, we
would like the chance to come back before this group and have
the chance to tell you about it.
Thank you very much.
[The prepared statement of Mr. Whitehorn follows:]
Prepared Statement of Will Whitehorn
Chairman Calvert, Ranking Member Udall, and other Members of this
distinguished subcommittee, on behalf of Virgin Galactic, thank you for
the opportunity to testify today. Virgin Galactic appreciates the
chance to explain how, with an unwavering commitment to safety, we plan
to make available and affordable an adventure of a lifetime. We are
proud to be on the leading edge of the commercial space industry and
honored to have Burt Rutan as our future partner.
I am Will Whitehorn, the President of Virgin Galactic. I also am
Group Corporate Affairs and Brand Development Director for Virgin
Management Limited. I have nearly 30 years of aviation experience
having previously worked for British Airways and Thomas Cook before
joining Virgin in 1987.
At the outset, I wish to acknowledge the invaluable leadership the
House Science Committee and this subcommittee provided last year for
the nascent commercial space industry. You ensured Congress struck a
proper balance in the Commercial Space Launch Amendments Act of 2004.
Had it not been for that sensitivity in crafting a proper regulatory
oversight regime consistent with the goal of permitting our emerging
industry to realize its full potential, it is unlikely the Virgin Group
would have made our considerable commitment to Virgin Galactic.
Virgin Galactic is a private sector venture. We receive no state
aid. Frankly, we think that is the way it should be. Entrepreneurs like
Sir Richard Branson who are willing to shoulder the economic risk and
challenge of commercializing space will be the most successful
innovators who lead this industry and chart its course. Government's
proper role is regulatory oversight and creating a climate in which
entrepreneurs can translate their vision into reality and innovation
can flourish.
The history of Virgin Galactic goes back to the mid-1990s when Sir
Richard Branson identified that new technologies in composite
materials, rocketry and computing could easily lead to the development
of safe, economical reusable spacecraft in the future. At that time, we
registered the Virgin trademark in the area of space travel. In 1999,
we registered the Virgin Galactic name.
Virgin has a long history of working with Burt Rutan going back to
the early 1990s. When Mr. Rutan informed us he was building a spaceship
for a private customer to win the X-Prize, we made a commitment to him
that we would be prepared to develop a commercial version of
SpaceShipOne should he be successful. Over the last year we have
negotiated with Paul G. Allen, the visionary and financier behind
SpaceShipOne, to buy the rights to use his technology. Following the
successful conclusion of these negotiations, we signed a $21.5 million
deal for the use of that technology and developed a $100 million
investment plan to build up to five spaceships at Mr. Rutan's factory
in Mohave, California. The plan for the ships themselves is being
developed by Mr. Rutan to a specification created by Virgin Galactic.
Safety obviously is our first priority. Our commitment to safety
extends beyond the Virgin name, one of the best-known and most valuable
brands in the world. Sir Richard Branson has said that he, along with
his parents, son and daughter plan to travel in Virgin Galactic's first
space flight. If the Federal Aviation Administration permits me to do
so, I hope to be on an earlier test flight. Our commitment to safety is
very real and personal to us. Safety is and will continue to be Virgin
Galactic's North Star.
Suffice it to say that the Virgin Group has considerable experience
in issues regarding passenger carriage and an unwavering commitment to
safety. Virgin currently operates three separate airlines around the
world which together carry over 50 million passengers a year. The best
known of these is Virgin Atlantic Airways whose main business is
operating scheduled services between the United Kingdom and a variety
of destinations in the United States, as well as flights to the Far
East, Africa and Australia. We have an unblemished safety record having
never lost a single passenger in over 21 years of operation. All of our
airlines also are profitable without ever having received any state
subsidy. We also operate the U.K.'s largest long-distance rail company
which also has an unblemished safety record despite carrying 35 million
passengers per year at speeds over 125 miles per hour.
Let me briefly describe the out-of-this-world service Virgin is
known for that, quite literally, we intend to offer to Virgin Galactic
customers. It is envisaged that the astronauts we carry will experience
a two hour trip. Half of that will involve the thrill of climbing to a
safe altitude with the mother ship and then our astronauts will
experience the exhilaration of spending an hour on SpaceShipTwo as it
accelerates to over three times the speed of sound and climbs to well
in excess of the 100km altitude officially recognized as entering
space, and becoming one of the few humans to have left the planet. Our
current plan is to begin operations in Mohave and then develop a second
site in another location that could possibly be either Florida, Texas
or New Mexico. The flights will be what is known as sub-orbital. The
pioneers who become astronauts with Virgin Galactic will initially pay
$200,000 for the trip but the Company hopes to reduce the cost over
time as the business develops. Our long-term goal is to develop
commercial space tourism into an orbital business which could in the
future carry payloads as well as people into orbit.
Chairman Calvert, the Subcommittee asked that I address several
specific questions in my testimony. Let me turn to them now.
The Subcommittee asked about the timetable for taking possession of
the Virgin Galactic spacecraft, first flight and expected
profitability. At this time, Virgin Galactic has a memorandum of
understanding with Mr. Rutan's company, Scaled Composites, to customize
the SpaceShipOne vehicle for commercial use. Design work to that end
continues. However, we have not yet formally ordered the spacecraft.
After U.S. Government technology transfer issues are clarified and
addressed if deemed necessary, we hope to place a firm order for the
spacecraft. At this point, due to uncertainty about possible licensing
requirements, we are not able to even view Scaled Composites' designs
for the commercial space vehicle.
Mr. Chairman, we are not concerned about this lack of clarity on
the technology licensing issue and the nominal delay it has caused to
date. Like any nascent industry overseen by government oversight
agencies faced with issues of first impression, we understand instances
such as this are to be expected. We are continuing a robust and cordial
dialogue with the Department of Defense and other agencies that provide
input on technology licensing issues. We hope a consensus can soon be
reached that will clear the way for us to move forward with a formal
order for Mr. Rutan's spacecraft.
In terms of first flight, we are hopeful Virgin Galactic will begin
service in either 2008 or 2009. Let me be clear, this is an estimate
only. As I testified earlier, safety is our North Star and it will
determine our launch date. We will launch as soon as our safety
assessments and training dictate we do so, and not a day before. Our
launch date estimate also assumes prompt clarification of the U.S.
Government technology licensing issue I just mentioned. The longer it
remains unresolved, it could adversely impact our projected launch
date.
As far as profitability is concerned, our business plan projects
that we will attain profitability in our fourth or fifth year of
operation. Importantly, this estimate assumes five spaceships, two
launch aircraft or mother ships, and two launch bases in the United
States. If the schedule for deploying any of these assets slips, it
would negatively impact our target date for profitability.
Mr. Chairman, the Subcommittee asked that I comment on the
differences in procuring a commercial spaceship fleet and Virgin
Atlantic's experience acquiring a fleet of commercial aircraft. At the
risk of sounding trite, the short answer is everything. Virgin Atlantic
is a customer of both Boeing and Airbus aircraft. Being a customer of
commercial aircraft essentially is a passive process. While you can
request some custom features, the aircraft as designed by the
manufacturer essentially is a complete unit and customer suggestions
and requests tend to relate to the margin. Virgin Galactic's
relationship with Scaled Composites is very different. It is an active
partnership. It is envisaged that we will work very closely together
designing the aircraft and sharing our complementary expertise. Simply
put, it will be a symbiotic relationship where ideas and intellectual
capital are shared by the customer and manufacturer to ensure a
successful product that benefits both.
This active partnership dynamic is precisely why we are so pleased
to have Burt Rutan as our future partner. Incidentally, in a decade or
so when the history books are written describing the birth of the
commercial space industry, I am confident that just as the Boeing brand
is synonymous with ushering in the age of commercial jet travel, Scaled
Composites will deservedly receive similar recognition for its
trailblazing role in our industry.
Mr. Chairman, let me now turn to the question the Subcommittee
asked about what preparations we presently are undertaking for the use
of the spaceships we plan to purchase from Mr. Rutan. We are focused on
complying fully with the letter and spirit of the Commercial Space
Launch Amendments Act of 2004. Scaled Composites will have sole
responsibility to certify the spacecraft. However, together, we are
engaged in an active dialogue with the Federal Aviation Administration
on other aspects of our business. At the same time, we are designing a
program to prepare our astronauts for an incredible sensory experience
and to allow them to gain the maximum from their journey to space. That
program will include training in all areas from physiological to
psychological. We want to ensure our passengers have the optimum
sensory experience but, even more importantly, that the operation will
be undertaken with the utmost safety, consistent with safety being our
absolute priority.
Finally, Mr. Chairman, you asked what, if anything, should the
government be doing to encourage commercial space. Let me reiterate a
point I made earlier. Virgin Galactic is a private venture. Consistent
with our belief that the proper role for government in encouraging the
commercial space industry should not include financial subsidies, we
receive no state aid. We believe there is great potential for mutually
beneficial partnerships between NASA and private companies involved in
our emerging industry. In other words, we support public-private
partnerships. For instance, NASA should seek opportunities to contract
with private sector manufacturers for cutting-edge designs and outside-
the-box thinking. I am encouraged by signs of progress in NASA's
willingness to engage with the private sector in idea sharing. This
spirit of cooperation should be encouraged and broadened whenever
practical to do so. Virgin Galactic, for example, would welcome the
opportunity to provide assistance to NASA for aspects of astronaut
training. If NASA's first instinct is to look to private sector
commercial space partners for opportunities to work together, I believe
both NASA and our industry will be the better for it.
Mr. Chairman, let me conclude by again thanking you, Ranking Member
Udall, and other Subcommittee Members for the opportunity to testify
today. Virgin Galactic looks forward to working with you and your
staff. Burt Rutan has expressed his wish to put the first private
spacecraft on Mars. It may be several more years before I get the
chance to address the Subcommittee on that subject! I am pleased to
respond to your questions today and to keep you apprised of relevant
developments as we prepare to take-off.
Biography for Will Whitehorn
Will Whitehorn is Brand Development and Corporate Affairs Director
of Virgin and one of five members of the Management Board of the group.
He is responsible for the corporate image of Virgin, public affairs,
global brand development and a number of new business development
activities most recent being the formation of Virgin Galactic, the new
Virgin space tourism operator due to launch flights in 2007-8, of which
he is President. In addition he acts as Richard Branson's spokesperson.
Aged 45, he joined Virgin Group in 1987, as Head of Corporate
Public Relations. Previously he was an Account Director at Lombard
Communications where he had worked on numerous flotation's and bids for
companies as diverse as Chrysalis Group, Ward White and Grampian
Holdings. Before entering the public relations industry he had worked
for British Airways as a helicopter crewman in the North Sea, was a
Graduate trainee with Thomas Cook Group and finally Market Intelligence
Officer for the TSB Group flotation. He was educated in Edinburgh and
graduated from Aberdeen University in 1981 with an honours degree in
history and economics.
Discussion
5-10 Year Commercial Space Industry Outlook
Chairman Calvert. I thank the gentleman.
Now we will open up for questions.
Mr. Rutan, this is obviously very exciting, and this is
moving a lot quicker than we imagined just a year ago that we
would be moving to this next stage of space exploration.
What is your outlook for the commercial space industry, you
kind of mentioned this in your testimony, but maybe you would
like to expand on this, over the next five to 10 years? And how
do you expect SpaceShipOne or SpaceShipTwo to fair
commercially? Do you--how--what do you see the vision of this?
Mr. Rutan. Yes, I did try to summarize that in my opening
remarks, but I will tell you that we won't sell spaceliners or
spaceships to spacelines that aren't safe to fly. And we don't
plan to develop ones that will have large direct operating
costs, because we don't need to. We believe we have all of the
technologies demonstrated. There are several new technologies.
There are probably a couple of new patents in work now relating
to the new vehicles that will be commercial. But I think our
risks that we need to take right now are tiny compared to the
risks that we took in the year 2001 to get to the goals of
SpaceShipOne. When we have available spaceships that can be
flown at low direct operating cost per seat and provide the
real experience, and I want to point out this will not be the
experience like you saw in SpaceShipOne where you have a small
cabin and people are strapped down and they have little
windows. The very first generation of commercial sub-orbital
spaceships will be experience-optimized. There will be large
cabins. There will be big windows. There will be--since you
only have four or five minutes of weightless time, they will
pull a bar open, and you will float your body about the cabin.
We think that is extremely important to do on a short space
flight.
So we are working very hard on assuring that this will be
extremely attractive to the public, it will be extremely
affordable, and it will be at least as safe as the early
airlines. If we achieve those goals, and I think we really can,
we don't have tough answers to--in front of us or new
challenges in front of us to get there, but if we achieve those
goals, I think this is going to be a much, much bigger market
than anyone imagines. I think once it is determined that this
is a business that is profitable, I think very much like the
early airlines, you will get dozens of businesses wanting to
be--wanting to compete with Virgin, for example, and wanting to
be space flight operators. I believe that a lot of those will
fail either financially or their ability to raise capital or
their inability to follow--to support and follow the
maintenance and other guidelines that we will set up. And in
fact, we are looking at having this not like selling a
spaceship that says, ``Here, take it and do what you want,''
but we are looking at doing it as a franchise, like a Wendy's
franchise. You buy our product, but you have to follow very
carefully our rules in how to maintain it and how to operate it
and the limits of its operation.
Chairman Calvert. I don't know if you want to use Wendy's
as an example.
Mr. Rutan. Well, okay. McDonald's franchise, right. But at
any rate, the important thing is because of where we stand in
the marketplace now, I think we will be able to assure that all
of the operators operate it safely.
Now I believe, like the early airlines, most of these that
want to that will try, I think most of these will fall out for
the same reasons that the early airline companies did. But I
expect to see that, say, in the--between five and 10 years into
the operation of these, I expect to see that you will have
three or four operators with multiple sites that are operating
reliably, and they are going to be competing with each other,
and they are going to have an enormous, enormous market. The
space market has never had any product, any payload that is
high volume. Generally, nowadays, if you are doing something
commercial in space, you don't complain a lot that you have to
pay $80 million to buy a booster, because your payload that is
in it, you may invest a half a billion dollars to build this
payload. Well, the payloads for this industry don't cost
anything. In fact, they pay to fly. That is a totally different
concept for the space industry. In fact, the payloads can be
easily reproduced by unskilled labor. And I don't see a limit
to it, whereas there has been very specific limits to
everything.
Another thing, if we reach our goals on affordability and
safety, it will affect everything else that is done in space.
For example, as we flow this capability of very high volume,
very low cost, high safety into the orbital market, all of a
sudden, those that go out and want to do exploration of the
planets, instead of being able to afford to build one or two of
these every couple of years, we can build thousands and
hundreds and send them everywhere and do real exploration
because it will be affordable. I have had NASA, two different
centers, including NASA headquarters, insisting that I keep
SpaceShipOne flying so that they can fly their payloads on it.
You know, they have made a lot of these payloads for student
projects and so on, and they just don't have an ability to fly
it.
My position on that has been that NASA certainly has a lot
more capability to fly science payloads than we do. They have a
space station. They have a reusable Space Shuttle. The reason
that they can't fly their own payloads is not my fault. And I
have refused to do that, because I have refused to have
anything in my way in order to, as quickly as we can, get an
operable system that flies safe and flies cheap. And I think it
is much better for NASA to just wait and buy tickets rather
than us doing science projects to develop that kind of
capability along the way. We have put all of this other
interest and all of this other stuff aside so that we can
quickly reach the goal. And that goal will help everything
else.
Chairman Calvert. Thank you.
Mr. Udall, a skilled man.
Mr. Udall. Thank you, Mr. Chairman.
The testimony that both of you presented was fascinating,
and I am looking forward to hearing more about your point of
view.
Regulatory and Approval Process
Mr. Rutan, you talked about some of the challenges working
through the--an approval process for SpaceShipOne. As you look
ahead at developing a commercial version of this spaceship,
have you had any discussions with FAA as to what you will have
to do to get your vehicle approved for commercial service? And
would you be willing to talk with us and/or provide some
specific ideas about changes to the process? And perhaps you
could do that for the record. Again, we have got limited time
today, but----
Mr. Rutan. Absolutely. I have had multiple meetings with
the FAA Administrator. I have insisted that at least one of
those meetings including having the airplane people as well as
the space people, you know, AVR as well as AST, and I did
succeed last month in having that meeting where all three were
in the same room. And that was in the FAA Administrator's
office. It was a meeting of more than two hours, and I made my
point that the FAA does need to stand up to the responsibility
for assuring the safety of the passengers. And I believe that
that process can be structured so that the applicant for flying
commercial flights can get an acceptance by the FAA that he has
indeed done his testing and has defined the testing that is
needed for--to show his margins, his safety margins. I believe
that can be done with a very minor effect on the cost of the
developer.
However, this is a subject that FAA seems to be afraid of.
They seem to be happy that they are not required under the new
legislation to certify these ships. And I think it is--really
comes down to the problem is that they just flat don't have the
people that are qualified to do it. I don't believe that the
new ships will go through a conformity process like you do in a
part 25 certification for airplanes. And we have developed
specific processes for that as suggestions. And I am--I hope
to, over this next month or two, have a meeting with the
working level certification people so we can present this. But
we have not had that opportunity yet.
Similarities to Airlines
Mr. Udall. Thank you.
If I could, I would move to Mr. Whitehorn.
You have got a background in the airline industry. Would
you talk a little bit about what aspects of your operations
that you think will be similar to the airline industry and
which aspects would be different?
Mr. Whitehorn. Yes. I mean, I think when we look at issues
such as the certification of the spacecraft, I mean, Burt
Rutan's company, Scaled Composites, will be responsible for
certifying the SpaceShipTwo, which we have developed into a
commercial business. So I won't talk about those issues at all.
We will leave that to Burt.
We will receive--we have engaged in an active dialogue as
well with the FAA at the moment, which is in a much happier
area, which is the area of what the passenger experience will
be and the program to prepare the astronauts for flight and the
regime that we will operate in terms of the safety of those
astronauts, what we will need to do on the medical front to
ensure they are fit to fly. We are planning to buy a system
from Burt Rutan, which would allow 80 percent of the population
of the world to fly in terms of medical areas. And in terms of
age, it would be open to anybody of any age to fly. But
obviously, from the point of view of the FAA, we will come up
with a set of standards and guidelines as to what we will deem
acceptable. And what the legislation allows us to do is to work
in quite an open forum on those issues of the guidelines as to
what the passenger will have to experience.
Where I think this differs from the commercial airline
industry is that the commercial airline industry has been
regulated now for the best part of 70 years, properly
regulated, in the United Kingdom and the United States. And the
difference here is that there is no precedent to base things
upon. The precedent of the past is to look at the best that has
happened in the world of commercial aviation and try and apply
the important principles of that but not create rules before we
know exactly the direction of where we are going is, but to try
and develop the rules that will be there for the future in as
open a forum as possible between the parties involved in this
industry. And I think that is achievable. I think the FAA has
an open attitude to those aspects. And I think that when it
comes to the certification of the craft itself, that is Mr.
Rutan's area, the principles around how it operates the
business will be our area, as the commercial operator. And you
know, I think the principles of safety for us are paramount.
The principles that we do want to create an experience for the
customers that they can have confidence in, and the kind of
sophisticated individuals we are dealing at the moment have an
understanding of risk, but they are expecting an experience,
which will be along the lines--I mean, as Burt said, the early
days of commercial aviation, back in the 1920s and 1930s, or
somewhere around where private aviation got after the second
world war in the USA in terms of the level of safety. That is
what the audience expects that we are addressing this product
to. And I think that our north star in safety is going to be
ensuring that the standards that we introduce to service at the
beginning of the operation of this by the end of this decade
are standards that then can be improved by experience all of
the time.
And if one starts from a prescription of where you begin,
you are never going to get to the position of creating
guidelines that can be improved and developed with experience.
And one of the things I am encouraged by, though, is in that
particular area I think the FAA is spot on in the way it is
working.
Mr. Udall. Thank you.
Chairman Calvert. Mr. Rohrabacher.
Mr. Rohrabacher. Well, I thank you very much. And let me
just sing the praises of Burt Rutan, who, of course, everybody
sings the praises of Burt Rutan. I don't know if you are Hans
Solo or Charles Lindbergh, but whoever you are, Mr. Rutan, you
are an historic person, and it has been my honor to have had
the opportunity to know you and to watch with amazement some of
the things you are doing. So thank you very much for being just
a role model to young--the young people in America and old
people in America as well.
Mr. Rutan. Well, thank you, Dana. I consider myself someone
that just hides out in the high desert in California and has as
much fun as I can. And I don't look at it that way at all, but
thank you very much.
Mr. Rohrabacher. Well, I would hope that when people are
studying in our universities and in our high schools that when
they pick people out to study and to see what type of person
they were and to use as examples for--I would certainly hope
that the education community takes a look at Burt Rutan and
makes him a full chapter in the book, because that is what our
young people need.
Mr. Rutan. I believe that the education, which has--NASA
has spent a lot of money over the last three decades on trying
to keep the interest in education, I believe that problem will
totally disappear once there is a growing industry out there
and kids can not just kind of be prompted to dream about being
an astronaut, they will be making their plans to fly. And once
you have that, I think we are going to get an enormous amount
of increase in those that go to school to learn engineering and
science and those that deal with all of the aspects of this new
industry. And I don't think our education problem will be a
problem at all once there is something real that is going on.
Mr. Rohrabacher. Okay. Thank you very much.
The--I had to leave a few moments ago, because Lieutenant
General Arnold, who is the command of the Space Missile Center
there in Los Angeles, was--needed to meet me right outside the
room here. And I think that it is significant, and you
mentioned this in your testimony in passing, that in the past--
as in contrast to the past, where there were spin-off effects
from America's defense spending to the private sector. You
believe that there is going to be a great spin-off or
collateral effect for national defense and other type of issues
from the private sector investment in space.
Mr. Rutan. I have got an example that supports that, and
let me just state that I don't think the primes--Lockheed and
Boeing, for example, I don't think they know it yet, they will
be developing large numbers of low-cost launch capabilities.
And the reason I say that is we have an example in front of us
that I really truly believe is a parallel and that is in the
late '70s, IBM did not know that in a few years they would be
building tens of thousands of $700 computers. They really
didn't know that. They found out that they had to force
themselves into that market. They had to realize that, ``Hey,
we are not just a company that makes a handful of mainframe
computers.'' And they changed very quickly, and they got in and
they competed. And I think that is going to happen also as this
paradigm changes to where there are the benefits of cost and
safety and an enormous lot of activity.
Mr. Rohrabacher. Which leads me to a question for Mr.
Whitehorn. And of course, let me applaud you, as well. Very
rarely do we have a witness come here before us in Washington
saying that they aren't asking for any help.
Mr. Whitehorn. Well, that is because I come from the United
Kingdom, and if you ask the government for any help, they just
don't get it.
Mr. Rohrabacher. But I noted--I think we noted two things
here. Number one, you were asking, basically, correct me if I
am wrong, for making sure that we have definitions of liability
that will permit your business to succeed. And I think that
that is something that we understand.
Export Controls and Tech Transfer
Number two, you also mentioned tech transfer, just in
passing. Is there a problem? And again, there are military and
security implications to the craft that is being developed,
because obviously, frankly, what Burt is developing here as
something for the general public has some very great
implications for the security of the United States and the free
world. Are there problems with transfer to Britain, to a
British company and----
Mr. Rutan. Yes, I thought that Britain--or that England was
a relatively friendly nation to America. And at least reading
the papers, you would see that. But when you try to export
designed things that are tied to either rockets or the avionics
that go in rockets, we have seen this as an extremely difficult
thing. And it has been one of the reasons that we have had to
move away from the basic concept of this being a foreign-funded
development of the ship, even though it is a very friendly
country. And I have been to London. I found these people seem
to like us, too.
Mr. Rohrabacher. Well----
Mr. Rutan. But let me point out----
Mr. Rohrabacher. And people will be able to get to London a
lot quicker in your----
Mr. Rutan. First of all, I don't think we are going to have
this problem in the short term now by developing the ship here.
And if we fly them within the United States, I think that
problem will be minimized. However, relatively soon, and I
think this will happen in the first decade of commercial
operations, there will be requests, and very serious, well-
funded requests. We have gotten them even from the guys
building that new city outside of Dubai. They want to run space
lines in their country. And when you take something that does
have some technologies that would transfer over--that could be
transferred over into a weapon, even though these technologies
are all really in the public domain, we run into very severe
restrictions. We have wrestled with this problem in terms of
technology transfer to Virgin Atlantic for about five months
now. And it has been--it doesn't seem to meet logic, and it has
been difficult. I think--and as a result of that, we are
discouraging, until there are routine commercial operations
going on in this country, and it can be shown that for the same
reasons that we sell airliners that we don't want to have
technology, that they don't have to have the technology in
order to operate a spaceline. And I think that is not going to
work on the early stages, because we just flat can not export
it. But I believe once there is routine operations going on
this country, then we will be able to surpass those roadblocks
and be able to set up sites in Dubai or in Australia or in
Europe.
Mr. Rohrabacher. Mr. Chairman, just one note, and I know my
time is up, and that is I have been a long-time advocate of a
two-tiered system of technology transfer controls where
countries like Australia and England and other countries that
are totally friendly to the United States should not have the
type of restrictions on them as compared to a country that
poses a potential threat to the United States. And thus, it
should be a totally free market with those countries.
Chairman Calvert. The gentleman----
Mr. Rohrabacher. Thank you very much.
Chairman Calvert. The gentleman is correct, however, you
know, there are still some burn marks from 1812 over at the
Capitol. We may have to send Virgin a bill for cleaning some of
that up.
Mr. Whitehorn. I would just like to add a couple of
comments to what Burt said there. We don't envision a problem
with the DDTC or with the Department of Defense. We are having
a robust and very friendly dialogue on this issue. But we have
made it clear to them that we are not planning to export the
vehicles, and we are planning to operate the vehicles only in
the USA to start with. But if you look at the marketplace, and
I think back to Burt's point about Boeing selling aircraft
around the world or Lockheed selling aircraft around the world,
the market for this is worldwide. Of the 29,000 people who have
registered that wish to pay the deposit, only 40 percent are
from the U.S. Now a lot of the people are going to be coming
from other parts of the world to fly in the U.S., but this
could be an export industry for the U.S. And you know, this
country has a balance of payments problem, there is no doubt
about it. And you know, you have to look to the methodologies
which you are adopting in terms of every aspect of export of
technology from this country, because, you know, it is the
export of technology, which is the lifeblood of an industrial
country. And at the moment, there are issues to deal with on
this front.
Chairman Calvert. I thank the gentleman.
Mr. Costa.
Mr. Costa. Thank you very much, Mr. Chairman and the
Ranking Member for having this hearing today. I think it really
focuses on a very important growing technology that I think all
of us are excited about. And I, too, want to commend Burt Rutan
as the recipient, for the second time, of the Collier Trophy.
It just goes to show that kids that grow up in Silicon Valley
can do good, as a native not far away from Fresno. We are very
proud of all of those accomplishments, obviously.
I have two questions, and I think it was important in
your--both--Mr. Rutan, your testimony, and Mr. Whitehorn, to
remind us of the history of aviation in the 1920s and the
1930s. Douglas and Northrop and a little company in San Diego
called Ryan that built an airplane for a fellow named
Lindbergh, and how that whole relationship developed between
entrepreneurs who had a vision and had a dream to fly and the
partnerships, the public partnerships that later developed.
Obviously, if it weren't for the establishment of the Federal
Postal System giving contracts to the fledging airlines of
those days, because the passengers certainly weren't paying for
the airlines to come together, but if you could get a postal
route, it made a big difference. And that whole evolution
process, and I think there are certainly applicable lessons to
be learned as we develop this industry, as you so well stated,
Mr. Rutan, in your comments, and you as well, Mr. Whitehorn.
Economics of Commercial Space
Two questions. One, and I don't know if you are yet at this
level in terms of developing your economic model. You talk
about 27,000-plus interested parties that have indicated, and
we hear the number thrown around about $200,000 per flight per
individual, and say, maybe half of those actually end up
purchasing a ticket. And you can do the math, obviously, but
have you done any economic models in terms of the multiple
impact? I spent some time in high-speed rail and others, and
they like to talk about a two-to-one factor, for every dollar
spent, there are $2 benefit in return in terms of the ripple
impact to other economic sectors or subcontractors or the like.
Have you developed anything like that yet at this point in
time?
Mr. Whitehorn. No, we haven't done it at this stage. I
mean, what we have done is we have taken Burt's costs in the
development of SpaceShipOne and some feasibility work that Burt
did for us last year before we signed the contract with them to
buy the technology. And we have modeled. We believe that with
it--for the expenditure of $120 million, we can get to a viable
business and that the early pioneers will pay $200,000 to fly
on this model, and we believe that by year five we can be
reducing those costs very considerably. And from the point of
view of the individuals, we believe that eventually we could
get it down to $25,000 or $30,000 after a number of years per
flight per person.
In terms of the economic impact outside of Virgin
Galactic's own business plan and Burt's own business is he uses
us as the launch customer, as Boeing would describe it. And our
status as a launch customer will obviously give Burt the basis
on which to invest in developing further projects. And we, in a
symbolic relationship, would envision ourselves developing an
orbital business eventually out of the Virgin Galactic
business.
My personal view is that the developments that we undertake
together, Burt as the manufacturer and ourselves as the
customer, will have a considerable effect on the industry as a
whole, on the space industry in the United States. NASA, for
example, you know, will be able to help us by being a customer.
But the reason they should come to us as a customer is because
we can do for them what needs to be done more efficiently than
they can do it themselves. And that is how public-private
partnerships work. One thing that the UK has actually excelled
in the past 20 years is privatizing its publicly owned
industrial structure and creating partnerships between the
public sector and the private sector. If you look at our
National Health Service in Britain, for example, it was run
like a Soviet operation 10 or 15 years ago. Everything was done
inside the health service. Now 10 billion pounds worth, so
about $20 billion worth, of contracts per year are let by the
National Health Service, which is a publicly owned institution,
to the private sector. I don't think NASA has gotten as far as
that in terms of its attitude to the private sector yet.
Mr. Costa. Yeah.
Mr. Whitehorn. But when it does, and when organizations,
such as NASA, buy in more and more from the private sector, as
this industry develops, and I don't mean the Lockheed or Boeing
private sector.
Mr. Costa. Right.
Mr. Whitehorn. I mean, not the primes, but the new industry
that emerges, I think you will see a ripple effect in terms of
investment. But it is too early to model that for the moment.
Mr. Costa. Thank you. And----
Mr. Rutan. Could I comment briefly on the launch customer
point that----
Mr. Costa. Sure.
Mr. Rutan.--Will made? I think it is extremely important to
us that we have a Virgin as a launch customer, because if I
would look back before Richard Branson's interest in this, my
business model assumed that this business would start off from
a low-credibility standpoint, both from developing and building
spaceships and for those that operate them. I didn't dream and
expect that a Jet Blue or a United or American Airlines would
come in and buy spaceships early in this game. I just--my gut
told me that they will pass on that. The fact that a major
world airline has stepped up and has told us that they want to
buy the first five spaceships and that they want to operate,
and they have already gone out and done market surveys and so
on, that fact that an airline, not just whatever else would--
you would think would be there, has stepped up has given me the
ability to go out and get the investment that is needed to
develop and certify the spaceships. So I didn't expect that we
would start off from that strength. The fact that we have a
launch customer, which is a successful, major airline is
absolutely huge.
Mr. Whitehorn. I have to add, of course, that Virgin
Atlantic is just another normal airline. As they say in Denmark
about Carlsberg, it is probably the best airline in the world.
Mr. Costa. Mr. Chairman, I know my time has run out, but I
do have a technology application question that Mr. Rutan might
want to respond to later on to the Committee, but I--in terms
of the application of this technology, I know there has been a
lot of investment by NASA and by some other companies on
hypersonic space flight to bridge the continents, and I would
like to have a better understanding of whether or not there is
an application of this technology to that at a later stage. And
you can maybe do that in a written statement or whatever suits
the Chairman.
Chairman Calvert. Certainly. We could move into our next--
Mr. Honda.
Mr. Honda. Thank you, Mr. Chairman and Ranking Member.
Let me just piggyback on my colleague's question, and maybe
you could answer that question at the same time that--piggyback
on the question that I am going to ask.
First of all, I--you know, as a kid that grew up watching
Flash Gordon in his young adult, the--you know, Star Trek and
all of that sort of stuff, I find this subject very
interesting.
A quick comment on NASA. I think NASA will probably be in a
position to do more partnering if this Administration had the
foresight to invest more into the projects that we have,
because currently we are looking at massive cuts, and massive
cuts that would affect young people who would consider space
flight and manned space flight if we were to invest properly in
a more healthy way into this area. That is a personal comment,
because I agree with both of you that NASA has a great role to
play. And as a schoolteacher, I do believe that NASA has a role
to play in terms of education and primary research.
Safety Concerns
Having said that, along with Mr. Costa's question, in terms
of research in manned space flights, do you believe that there
are--that humans can be subjected to unknown kinds of exposures
that we haven't even thought of as of yet that we should be
looking at in terms of safety and long-term safety, whether it
is intercontinental, high-speed, supersonic travel or orbital
space flights? What would be your reaction to that?
Mr. Rutan. Well, there is nothing that is unknown about
what we are going to put humans exposed to in order to have
this sub-orbital industry grow and be healthy. We know all of
the answers to those things. They are very straightforward.
They are very acceptable, and they are--you--by the way, you do
want to expose someone to forces in order for it to be fun. And
the--there are now showstoppers out there at all. Now as we
move on and go to the planets where you have long-term exposure
to radiation and so on, there are serious things that need
solutions, but that is not for the work that we are likely
going to be doing this decade. That is the next step. But I
don't see any roadblocks at all on technologies, and I don't--I
do not believe we need any research work done at NASA to
support the sub-orbital private space flight industry. I
believe when the private space flight industry moves to taking
people to the moon and the planets, NASA will be a very strong
player, because they do need to get back into their role of
doing basic research rather than running the airline. And I see
a big role for NASA as we go to low-Earth orbit, and
particularly as we go above low-Earth orbit. And I think Mr.
Musk will comment more on his, because he is working on orbit,
and we are not. But for this new industry that we have been
developing here on this panel, we don't see a role at all for
NASA.
Mr. Whitehorn. If I can just add to that, very quickly. I--
one of the things we are working with the FAA at the moment is
the guidelines. And one of the guidelines is that we explain to
the customers exactly what the risks are. And those risks are
known, so the risk of----
Mr. Honda. Oh, okay.
Mr. Whitehorn.--gamma radiation, for example, will be
explained to the customers. And you know, you are talking about
a level of risk of a CT scan for a flight on a sub-orbital
craft.
Mr. Honda. So you have research on that, then?
Mr. Whitehorn. There is plenty of research on it, which
goes back decades now. And the research in the airline industry
and the research that was done around the introduction of
Concord back in the 1970s is all perfectly relevant to this
particular situation. I mean, the only risks we don't know
about is, you know, the possibility that we might meet aliens
since there will be several thousand flights rather than just a
few hundred over 40 years.
Mr. Honda. Well, that is a buzzword in this country.
Thank you.
Chairman Calvert. Thank you.
Mr. Wu.
Mr. Wu. Thank you very much, Mr. Chairman.
I have a couple of questions, but I just want to start by
saying that, you know, my dad was in the aerospace industry. By
then, the industry was already fairly mature, and names like
Northrop and Boeing were institutions rather than individuals,
but by having an affection for whatever field I am in, I dig
into the history. And it was interesting for me to find the
individuals behind those institutions, and that was a romantic
era when the founders of these great institutions were first
starting their businesses.
Return-to-Flight
I want to salute you all for your cutting-edge work, and I
truly believe that Mr. Whitehorn, Mr. Rutan, you and Mr.
Branson will be remembered in the aerospace pantheon with the
likes of Jack Northrop and others, and I really want to
recognize that.
And Mr. Rutan, it was a long time ago, but I made a 200-
mile drive to see Voyager land in the Mojave Desert, and that
was one of the great moments of my life to see that aircraft
come in. It is just really terrific. I try to explain its
significance to my son when we see it at the Air and Space
Museum. He is less than completely impressed right now, but I
think--he is seven, and----
Mr. Rutan. I believe the Voyager pilot is with us in the
audience today, too, my brother, Dick.
Mr. Wu. Well, you flew it really nice, straight, and level
all of the way in. And you did walk away from the landing,
which is a very good thing. Thank you. It is very, very
impressive.
I really want to ask you all a couple of questions apart
from commercial space and what you have been working on,
because, you know, sometimes in the course of your work and
your extensive background, you can shed valuable light on other
organizations and other processes. And the two things I wanted
to check with you about are really NASA and federal programs.
As you know, the launch window for the next Shuttle opens
approximately May 15, and I was wondering if either of you,
particularly Mr. Rutan, but either of you, have any commentary
as you have observed. I mean, I know you all have been very
busy, but if you have observed the NASA return to space--return
to flight efforts, if you have any observations to share with
us. And then I have one other question after that.
Mr. Rutan. Well, I feel very privileged to have an
appointment this afternoon with the new NASA Administrator,
even though he has only been on the job a couple of days. So I
believe there is likely going to be major changes on what we
believe is ahead, and I would prefer to not guess, at least
until I have had a chance to give him my thoughts and to have a
better idea of what is likely to happen at NASA. But I believe
there will be major changes in what NASA's activities were
otherwise going to be because Mike Griffin is on board. So I
really don't think it would be appropriate for me to guess on
that until I have a little more information.
Mr. Whitehorn. I would like to make a general comment.
I think it is incredibly important for the future of space
that NASA returns to space flight. I think there is an enormous
psychological impact. And you know, one of the comments that
was made earlier was about in education. When I was brought up
as a young lad in Scotland, my parents told me that I would
probably go to space when I grew up and that they wouldn't be
alive to see it, but I would. The generation beyond my
generation grew up not believing they would ever go to space.
They ceased to believe it, because the whole attitude to space
became, ``Robots will do it, because robots are going to be
cheaper,'' and scientists decided that robots were where space
was going. And to be honest with you, the psychological impact
of that around the globe was that people actually stopped
believing in the whole idea of the exploration of space,
because why do human beings want to pay through their tax
dollars to fund something that they are never going to get the
chance to ever experience themselves? However, science has
moved on. Our understanding of our own planet has moved on
enormously in the last 20 years, and people have realized that
our tenure on this planet is pretty limited, that you know,
there will be catastrophic events that could damage
civilization itself, and that they happen on a more regular,
say, precept than we had thought of 30 or 40 years ago.
So the idea that we can't ever leave this planet is a
psychologically damaging one to the whole concept of
civilization, development, and science and technology itself.
So not only is this private sector venture incredibly
important, but also NASA's return to space flight is incredibly
important, and I think we should laud them for, hopefully, what
will be a great event around May the 15th or shortly
afterwards. And it was interesting, my son went to see
SpaceShipOne the Christmas before last. And he went back to his
school in England, and the schoolteacher was asking, ``What did
you do in the Christmas holidays?'' of all of the boys in the
class and the girls in the class. And he said he had been to
see the spaceship and his dad might be building one. And the
science teacher sent him out of the class. And the difference
between two years ago and now is that he has had a letter of
apology about that and--thanks to Burt succeeding in the X-
Prize, and also, you know, if you look at the attitude to space
at the moment, the interest there was in the Mars mission,
because this government announced that you were going to intend
to go to Mars with human beings, and the worldwide coverage of
the Mars Explorer last year was dramatically different to the
previous coverage of the early missions to Jupiter, for
example, in the late '80s and early '90s, which didn't attract
that much public interest or attention. The fact that human
beings are going out beyond this planet is the incredibly
important principle that NASA has to re-establish and it is
doing so now, which is to be lauded.
Mr. Wu. Thank you very much.
And Mr. Chairman, with your forbearance, if I can get out
my second question.
The--if--and I look forward to hearing, Mr. Rutan, your
observations in private after you have had your meeting. And
Mr. Whitehorn, I completely agree with you about the importance
of NASA's return to flight. It has tremendous symbolic as well
as real significance, and I think the whole Nation, the whole
world, will be holding its breath. And that is why it is so
important.
NASA Aeronautics
The other thing that gets a whole lot less attention and
that is that we talk all of the time about space, but we forget
about the aeronautics mission of NASA. And I was wondering if
either of you have views about whether NASA has under-
emphasized its aeronautics mission perhaps at the expense of
either American competitiveness or world aviation.
Mr. Rutan. Well, before NASA, there was NACA. And NACA did,
indeed, support the industry by providing wind tunnels and
providing basic research, really very well focused on the kinds
of things that a manufacturer would need in order for him to go
out and build an airplane and compete and to build the
industry. NACA never did run an airline. NASA now is running
the only airline that America has in space. So it is a
considerably different thing. I don't think just by throwing
more funding to NASA you are going to get help on the
aeronautics. I think you are going to have to be specific, and
you are going to have to identify the resources that NASA has
for aeronautics, which one of the wind tunnels are critical,
and the ones that are critical need to be--remain open so that
the developers all of the way down to--all of the up from
Boeing and all of the way down to Scaled Composites can use
these facilities, because they are national assets that we have
spent money for.
In general, though, in terms of the research done at the
individual level, say, calculations and so on, at NASA, what
has happened is because the airline industry and the military
airplane development industry is so competitive, you will look
inside Northrop and Boeing and so on and you will find better
skills there of these technologies than you find looking inside
the labs at NASA. So I am not a proponent of keeping a lot of
that alive if it is not something that flows good information
out to the U.S. manufacturers. I don't see a benefit there. But
I think at least on the short term, we have got to make sure
that the wind tunnels that are important and the assets that
are important that the government owns, that they not be just
thrown away.
Mr. Whitehorn. I would agree with Burt's testimony.
I would also add that I think one of the issues that NASA
has had to face over the last 45 years is that it really hasn't
had a clear output specification of what it should be doing
from government on behalf of the people of the States. I mean,
it is, to me, very, very interesting that NASA had--if you look
at the 1970s and 1980s, it was very direction-less for a long
period of time. And it was also part of a Cold War that existed
between the Soviet Union and the USA, and people forget that
these days. It was forced to do things by government by using
tax dollars, which were part of the Cold War itself, rather
than part of the exploration of space. And I think NASA, for
the first time in, probably, two decades, has a very clear
direction at the moment, but it mustn't be thinking in that
clear direction about the mechanics of achieving it using the
ideas of the past. It mustn't get stuck into the rut of,
``Well, we have got to do this so we have got to build this
type of rocket, because that is the way you do it.'' It should
really be thinking about, you know, if the best way to do it is
to build something out of paper mache and send it into space,
because that will work more effectively and be more cost-
effective and safer, then that is the way we should think about
doing it. And I think that attitude and that cultural change in
NASA you can definitely see happening at the moment from the
outside.
Chairman Calvert. I thank the gentleman. I thank the
gentleman for his questions.
Mr. Wu. I thank the witness, and I thank the Chairman for
his forbearance.
Chairman Calvert. Okay. We are spending a little more time
on this panel than we expected, but it is very interesting. Mr.
Bartlett has joined us. Does the gentleman have any other
questions or----
Mr. Bartlett. I am sorry I couldn't have been here for the
whole hearing. Thank you all very much for coming.
Are you making an argument, maybe, that you ought to be--we
ought to be rethinking NASA and its mission when you note that
the aeronautical area has--now has large companies, very
competitive, that are able to attract skills that it is
difficult for the government to match? I have a general
philosophy that government needs to be only where they need to
be, and if we don't need to be in an area, maybe we shouldn't
be there.
Mr. Rutan. Well, I don't think that it is NASA's role to do
development, and I don't think it is NASA's role to run an
airline or a spaceline. I think it is NASA's role to do basic
research to discover--to allow the discovery of breakthroughs.
The problem that we have is if you define research, like I
think it should be defined, and that is if there is something
out there that you are trying to achieve and you want to put
funding in to achieve it, if half of the people that look at
that goal look at it from the standpoint of, ``Oh, man, that is
tough. And, God, it would be neat if you could do it, and I
think you can do it.'' And then the other half of the
technologies looked at--technologists look at that and they
say, ``Well, hell, that is impossible.'' Okay. I believe at
that level, then to go after it, you are doing research. But if
everybody says, ``Oh, yeah, that will work, and we are just
here to kind of refine it,'' then all you are doing is
development. And that is my argument with this exploration
program now is they are not out there looking for the
breakthroughs. They are not out there looking for things that
can make big differences. They are really--NASA is doing
development, because NASA, in general, and it may be somewhat
of things imposed by them by accident committees. It may be
some things that are imposed on it by you folks who pass out
their money. But they just flat are scared to death of failure,
and if they are scared to death of failure, you are incapable
of doing research. I think NASA ought to be funded to do
research to support America's airline industry and America's
military development industry, and that means that most of what
they do are things that are expected to fail. And that takes a
whole different culture and a whole different idea. That is
what NASA ought to do.
Mr. Bartlett. I come from a science background. I
appreciate very much your understanding that there is no
unsuccessful experiment.
Mr. Rutan. Right.
Mr. Bartlett. If it doesn't work, that is a success. You
learn----
Mr. Rutan. Right.
Mr. Bartlett.--that it doesn't work, so you have got to try
something else next time.
Mr. Rutan. And if you are afraid to fly it, you never learn
anything.
Mr. Bartlett. That is right. You know, and people who don't
come from a science background have a lot of trouble
understanding that, that there is no unsuccessful experiment.
If it didn't work, it didn't work, so we will try something
else next time.
But for people who are--who want to avoid failure, they see
an experiment that--where you didn't prove your hypothesis,
where the data did not support your hypothesis, they see that
as a failure, and so they don't want to do it. And when you
have that kind of timidity, you are not going to push the
envelope very far very fast.
Mr. Rutan. The X-34 is a very good example. Here is
something that was funded all of the way through, essentially
ready to fly, and then was not flown because it was deemed to
be risky. And you know what happened shortly after we had some
failures in some Mars missions, and they decided, ``Listen, we
don't like it, because it is risky, so we don't fly it.'' And
that is, essentially, what happened. If they had have flown
that and made a smoking hole in the desert, you would learn
something from it. When you don't fly it, you have wasted all
of your money and you have defined certain failure of your
goals.
Mr. Bartlett. I appreciate your concern.
Thank you very much, Mr. Chairman.
Chairman Calvert. I thank the gentleman.
I certainly thank this panel. Mr. Rutan, again,
congratulations for your accomplishments.
Mr. Whitehorn, thank you for putting some risk capital
behind this, and that is what entrepreneurship is all about.
I am going to have a question--a couple of questions, one
that I will--because we--in the interest of time, about the
long-term prospects for space tourism on full orbital flights.
And if I can put that in writing to you and get a written
response what kind of technologies need to be developed and
what do you see is a timeline for something like that.
With that, again, thank you very much for your testimony.
It is very interesting. We have spent more time on this than we
thought, but you were very kind to stay here, and it was very
interesting for us. Thank you very much.
Mr. Rutan. Thank you.
Chairman Calvert. Okay. Our next panel: Mr. Elon Musk is
the CEO and Chief Technology Officer for Space Exploration
Technologies, SpaceX; Mr. John W. Vinter is Chairman of the
International Space Brokers, ISB; Mr. Wolfgang Demisch, the
founder of Demisch Associates, LLC, Aerospace Financial
Analyst; and Dr. Molly Macauley, Senior Fellow and Director of
Academic Programs at Resources for the Future.
Of course, Mr. Musk is known for inventing, what is it,
PayPal and very successful and now is investing his money in
something that is even more interesting, and that is space
exploration.
With that, Mr. Musk, we are going to try to stay on our
traditional schedule now of five minutes of testimony and five
minutes for questions. We kind of let that go with the last
panel, but we are going to stick to it this time.
So Mr. Musk, thank you very much for coming, and you may
begin your testimony.
Panel II:
STATEMENT OF MR. ELON MUSK, CHAIRMAN AND CEO, SPACE EXPLORATION
TECHNOLOGIES (SPACEX)
Mr. Musk. All right. Thank you. There we go. All right.
Chairman Calvert, distinguished Members of the Committee,
thank you for having me here. It is an honor to be here.
I will address the questions as directly as possible.
The first one is: ``What is the SpaceX business plan?''
SpaceX is dedicated to improving the reliability and cost
of access to space for the greater purpose of helping us become
a space-faring civilization one day. Without dramatic
improvement in those two inseparable metrics, cost and
reliability, we will never exceed the great deeds our Nation
accomplished for all humanity with the Apollo program.
Although the ultimate goal of SpaceX is to provide heavy-
lift, super-heavy lift, in fact, and manned launch vehicles, we
have chosen to focus our initial efforts on a small rocket
capable of launching satellites to low-Earth orbit. This
vehicle, the Falcon I, is effectively a sub-scale technology
test bed, ensuring that the inevitable areas of development
occur at a small scale and without people on board.
However, the Falcon I, which has the lowest cost per flight
in the world, and is entirely American built, is also showing
strong market demand in its own right. We already have three
firm contracts for launch and expect to close another two
before Falcon I performs its maiden flight later this year.
Once Falcon I has a few flights under its belt and the
satellite producers have time to adjust, I think it is quite
possible that there will be more flights of Falcon I than any
other orbital launch vehicle in the world.
It is also worth noting that the Falcon I is the only semi-
reusable rocket in the world, apart from the Space Shuttle.
However, reusability is not currently factored into the price.
As we refine that process, we may be able to make further cost
reductions and hope to make further cost reductions in the cost
per flight of Falcon I. As far as reliability is concerned, the
Futron Corporation, which is used extensively by NASA and the
FAA, concluded that the Falcon I, despite being low cost, had
the second highest design reliability of any American rocket.
It was tied with the most reliable version of the Boeing Delta
IV and Lockheed Atlas V. The highest design reliability rank
was held by our Falcon V design, which will be the only
American rocket that can lose any engine or motor and still
complete its mission, which I think is really quite crucial.
The Falcon V, scheduled for first flight next year, is a
medium-lift rocket designed to carry people as well as
satellites. As such, the design margins will meet or exceed the
NASA requirements for manned spacecraft. In fact, my current
instruction to the design crew is that they exceed the NASA
specs. My hope is that this vehicle will provide the United
States with an all-American means of transporting astronauts to
orbit and ensure that we are beholding to no one once the Space
Shuttle retires.
All in all, I see an increasingly positive future for
commercial space activities over the next five to 10 years.
But what should the government do or not do to encourage
the nascent commercial space industry?
The most important thing that the government should do is
adopt a nurturing and supportive attitude towards new
entrepreneurial efforts. In particular, the government should
seek to purchase early launches as well as offer prizes for
concrete achievements. Evidence for the tremendous power of
prizes can be found throughout history, most recently,
obviously, with the X-Prize and the best evidence being the
prior panel.
Regarding purchasing early launches, the Defense Department
has been very supportive and has done the right thing at every
level, purchasing two of the four launches we have sold to
date. But regrettably, NASA has not yet procured a launch and
has provided less financial support than the Malaysian Space
Agency, who has bought and paid for a flight on Falcon I.
However, I am very much heartened by the recent
confirmation of Dr. Griffin as the new NASA Administrator. I am
confident that his outstanding technical ability, dedication,
and diverse experience will invigorate our space program. With
a finite budget and entrenched interests to fight, Dr. Griffin
will be forced to make some difficult decisions in the year
ahead. I urge Congress to give its full support to Dr. Griffin
when he does so.
As far as what the government should not do, I think it is
important to minimize the regulatory burden required for space
launch activities. And a comment made by Mr. Rohrabacher early
on regarding the ITAR rules and having ITAR apply only to
certain countries and not to others with--you know, we are in
close military alliance, I think makes a lot of sense. But
right now, we have the greatest difficulty just dealing with
people from New Zealand and from the UK and from Canada. I
mean, for goodness sake, it just becomes a bit silly. I really
think we need to--there is an urgent need for reform in that
area. I think, unfortunately, the American industry is really
being harmed by this. And so it--but in general, we should do
no more than is necessary to protect the uninvolved public, I
think, as far as regulation is concerned. It sometimes seems to
me that our society is paving the road to hell one regulation
at a time.
And are there implications for the commercial space
industry as you see it in the President's announced Vision for
Space Exploration?
Well, the NASA budget is unlikely to see significant
increases in years ahead, and in fact, will face severe
pressure from entitlements just when we really need to spend
money on the moon and Mars in, say, 10 or 20 years. Compounding
the problem, U.S. launch prices have been increasing every
year. So this places NASA in a financial vice, a continually
tightening financial vice.
Unless we can reverse the trend of rising costs, we are
going to accomplish less and less every year. So therefore, the
only way that our country can meet the President's Vision, or
really, any interesting objectives in space, is to encourage
the development of new, low-cost access to space. If we can't
afford to get there, the Vision will remain--or will become
nothing more than a mirage.
[The prepared statement of Mr. Musk follows:]
Prepared Statement of Elon Musk
Chairman Calvert and distinguished Members of the Committee, thank
you for inviting me to testify today on Future Markets for Commercial
Space. It is an honor to be here.
What is the SpaceX Business Plan?
SpaceX is dedicated to improving the reliability and cost of access
to space for the greater purpose of helping us become a true space-
faring civilization. Without dramatic improvement in those two
inseparable metrics, we will never exceed the great deeds our nation
accomplished for all humanity with the Apollo program.
Although the ultimate goal of SpaceX is to provide super-heavy lift
and manned launch vehicles, we have chosen to focus our initial efforts
on a small rocket capable of launching satellites to low-Earth orbit.
This vehicle, the Falcon I, is effectively a sub-scale technology test
bed, ensuring that the inevitable errors of development occur on a
small scale and without people on board.
However, the Falcon I, which has the lowest cost per flight in the
world for a production rocket and is entirely American built, is also
showing strong market demand in its own right. We already have three
firm contracts for launch and expect to close another two before Falcon
I performs its maiden flight later this year. Once the Falcon I has a
few flights under its belt and the satellite producers have time to
adjust, I think it is quite possible that there will be more flights
per year of Falcon I than any other vehicle in the world.
It is also worth noting that the Falcon I is the only semi-reusable
rocket in the world, apart from the Space Shuttle. However, reusability
is not currently factored into the price. As we refine that process,
the cost of Falcon I will decline over time. As far as reliability is
concerned, the Futron corporation, which is used extensively by NASA
and the FAA, concluded that Falcon I had the second highest design
reliability of any American rocket. It was tied with the most reliable
version of the Boeing Delta IV and Lockheed Atlas V. The highest design
reliability rank was held by our Falcon V design, which will be the
only American rocket that can lose any engine or motor and still
complete its mission.
The Falcon V, scheduled for first flight next year, is a medium
lift rocket designed to carry people as well as much larger satellites.
As such, the design margins will meet or exceed NASA requirements for
manned spacecraft. My hope is that this vehicle will provide the United
States with an all American means of transporting astronauts to orbit
and ensure that we are beholden to no one once the Shuttle retires.
All in all, I see an increasingly positive future for commercial
space activities over the next five to ten years.
What should the government do or not do to encourage the nascent
commercial space industry?
The most important thing that the government should do is adopt a
nurturing and supportive attitude towards new entrepreneurial efforts.
In particular, the government should seek to purchase early launches as
well as offer prizes for concrete achievements. Evidence for the
tremendous power of prizes can be found throughout history, most
recently with the X-Prize.
Regarding purchasing early launches, the Defense Department has
been very supportive and has done the right thing at every level,
purchasing two of the four launches we have sold to date. Regrettably,
however, NASA has not yet procured a launch and has provided less
financial support than the Malaysian Space Agency, who has bought and
paid for a flight on Falcon I.
However, I am very much heartened by the recent confirmation of Dr.
Griffin as the new NASA Administrator. I am confident that his
outstanding technical ability, dedication and diverse experience will
invigorate our space program. With a finite budget and entrenched
interests to fight, Dr. Griffin will be forced to make some difficult
decisions in the years ahead. I urge Congress to give its full support
to Dr. Griffin when he does so.
As far as what the government should not do, I think it is
important to minimize the regulatory burden required for space launch
activities. We should do no more than is necessary to protect the
uninvolved public. It sometimes seems to me that our society is paving
the road to hell one regulation at a time.
Are there implications for the commercial space industry as you see it
in the President's announced Vision for Space
Exploration?
The NASA budget is unlikely to see significant increases in coming
years and in fact will face severe pressure from entitlements in the
next decade. Compounding the problem, U.S. launch prices from existing
contractors are increasing every year, sometimes significantly.
Unless we can reverse the trend of rising costs, NASA will be
placed in a continually tightening financial vice, accomplishing less
and less each year. Therefore, the only way that our country can meet
the President's Vision in a meaningful way is by encouraging the
development of new, low cost access to space. If we can't afford to get
there, the Vision will become nothing more than a mirage.
Biography for Elon Musk
Elon is the CEO & Chief Technology Officer of Space Exploration
Technologies (SpaceX), which is developing a family of launch vehicles
intended to reduce the cost and increase the reliability of access to
space ultimately by a factor of ten. The company officially began
operations in June 2002 and is located in the heart of the aerospace
industry in Southern California.
SpaceX is the third company founded by Mr. Musk. Prior to SpaceX,
he co-founded PayPal, the world's leading electronic payment system,
and served as the company's Chairman and CEO. PayPal has over sixty-
five million customers in 38 countries, processes tens of billions
dollars per year and went public on the NASDAQ under PYPL in early
2002. Mr. Musk was the largest shareholder of PayPal until the company
was acquired by e-Bay for $1.5 billion in October 2002.
Before PayPal, Mr. Musk co-founded Zip2 Corporation in 1995, a
leading provider of enterprise software and services to the media
industry, with investments from The New York Times Company, Knight-
Ridder, MDV, Softbank and the Hearst Corporation. He served as
Chairman, CEO and Chief Technology Officer and in March 1999 sold Zip2
to Compaq for $307 million in an all cash transaction.
Mr. Musk's early experience extends across a spectrum of advanced
technology industries, from high energy density ultra-capacitors at
Pinnacle Research to software development at Rocket Science and
Microsoft. He has a physics degree from the University of Pennsylvania,
a business degree from Wharton and originally came out to California to
pursue graduate studies in high energy density capacitor physics &
materials science at Stanford.
Chairman Calvert. I thank the gentleman for his testimony.
Mr. Vinter.
If the gentleman would turn on his microphone.
STATEMENT OF MR. JOHN W. VINTER, CHAIRMAN, INTERNATIONAL SPACE
BROKERS
Mr. Vinter. Yes.
Good morning, Mr. Chairman. Thank you. Members of the
Subcommittee, good morning as well.
My name is John Vinter, Chairman of International Space
Brokers. Our office is in Rosslyn, and we have subsidiary
offices in London and Paris. I am pleased to testify before the
Subcommittee.
My company represents a ``who's who'' of satellite users,
including, in the U.S., Intelsat, XM Satellite Radio,
Worldspace, AT&T, Bigelow, Kistler, and SpaceX. Additionally,
we represent SES Astra in Luxembourg, Telesat Canada, New Skies
Satellites in the Netherlands, Optus in Australia, Star One in
Brazil, and Singapore Telecom. We have also managed the third-
party liability program for the Shuttle when they were flying
commercial missions.
I am also the Chairman of COMSTAC, the DOT's Commercial
Space Transportation Advisory Committee.
You have asked me today to address three questions: ``What
kind of activities does your company include for insurance
purposes in its definition of commercial space?'' ``As
insurance brokers, what do you see as the outlook for
commercial space activities in the next five years, 10 years?
How do you think we should avoid exaggerated expectations in
the industry, such as those that occurred in the low-Earth
orbit market in the late 1990s?'' and finally, ``What, if
anything, should the government do or not do to encourage
commercial space endeavors?''
With respect to commercial space, we include any space
activity which does not directly involve the U.S. Government as
an insured. We address satellite insurance and risk management
needs from ``cradle to grave.''
For us, commercial space begins with the arrival of people
or equipment at the various launch sites, continues through
launch, deployment, testing, and on-orbit operations of
satellites through the end of their expected lives. These are
the areas of risk where we spend the majority of our time and
where satellite owners spend the majority of their insurance
money. The launch itself is generally the riskiest and most
expensive phase of any commercial space endeavor. In simple
terms, our objective is to cover the risk of loss or damage to
the satellites, including failure of the launchers or failure
of the satellite to work according to the specifications. In
general, as a comment, the market wishes to see successful
first flights before insuring.
We also provide liability coverage for damages to third
parties caused by launch and related activities and accidents.
Again, commercial space insurance begins with arrival of
equipment or people at the launch site and continues through
on-orbit operations. As with the satellite coverage above,
activities prior to arrival at the launch site are best covered
in non-space insurance markets.
We also insure persons, for example, astronauts, tourist
visitors to the Space Station, and individuals who have flown
on the Shuttle. We also can insure various contingencies such
as acts of governments, and yes, we could probably even insure
a space prize.
As insurance brokers, what do you see the outlook for
commercial space in the next several years?
We see space activities evolving and growing, albeit not
very fast. The world's satellite manufacturers and launch
vehicle providers have considerable excess capacity. There does
not seem to be sufficient demand to absorb this excess in the
near future. For the next several years, we think there will be
approximately 15 to 20 commercial launches a year. We see,
however, more human activities in space, the X-Prize being the
first, and no doubt the America's Prize will be the second. And
other incentive programs I am sure will generate an increase in
activities.
I hope Mr. Rutan and Mr. Whitehorn, the other gentleman
from Virgin Galactic, are widely successful and very active.
The insurance community will be there for them, but it still
remains to be seen.
What, if anything, should the government do?
Well, with respect the government involvement to encourage
space endeavors, I offer the following. I would suggest the
government maintain the current liability risk-sharing regime
of private insurance, government indemnification in excess of
private insurance, and cross waivers. This regime was
established in the late '80s and was renewed last year for an
additional five-year period. This system, in my judgment, is
working very well. It has been adopted by non-U.S. launch
organizations. I know there are doubters, but I believe this is
very essential to the commercial launch business in the U.S.
I also would recommend we take another look at the
International Traffic in Arms Regulations as regards to
commercial space to see if they really achieve what they are
meant to achieve. We handle these matters for some of our
clients, and the people who review the matters for licensing
and monitoring are doing an excellent job and in a very timely
fashion. The practical impact is not so clear. From the
insurance point of view, this is an essential area, because 2/3
of the insurance market is located outside the country, and it
appears that the same underwriters show up on every program,
but they have to be individually cleared for every program. I
believe that the U.S. industry would benefit if the process can
be streamlined. I should also point out the whole process is
pushing satellite business overseas as non-U.S. operators find
it increasingly difficult to cope with the whole process.
I believe the use of government ranges and government
purchases of commercial space services, where feasible, seems
to be working well. I would, of course, defer to others, such
as Mr. Musk, for their comments.
In this age of deficit spending, I would be hesitant to
recommend additional public spending, but perhaps it could be
considered by way of providing seed money for promising new
technology.
This concludes my testimony. I will, of course, be pleased
to answer any questions. Thank you.
[The prepared statement of Mr. Vinter follows:]
Prepared Statement of John W. Vinter
My name is John Vinter, Chairman of International Space Brokers,
Inc. My office is in Rosslyn, VA, and we have subsidiary offices in
London and Paris. I am pleased to testify before the House Committee on
Science, Subcommittee on Space and Aeronautics.
My company represents a ``Who's Who'' of satellite users, including
the following: In the U.S., Intelsat, XM Satellite Radio, Worldspace,
AT&T, Bigelow, and SpaceX. Additionally, we represent SES Astra in
Luxembourg, Telesat Canada, New Skies Satellites in the Netherlands,
Optus in Australia, Star One in Brazil, Singapore Telecom in Singapore,
and others. We also have managed the Shuttle third party liability
insurance program for NASA.
I am also the Chairman of COMSTAC, the Department of
Transportation's Commercial Space Transportation Advisory Committee,
advising the FAA's commercial space transportation office. In my
career, I have been fortunate, in separate career phases, to work for
both a satellite company having the need for insurance as well as an
underwriter company providing insurance coverages. Today, I am a broker
representing the above mentioned clients, and others, in the purchase
of insurance from the international space insurance market. You have
asked me to address the following questions:
1. What kind of activities does your company include for
insurance purposes in its definition of ``commercial space''?
2. As insurance brokers, what do you see as the outlook for
commercial space activities in the next five years? Next 10
years? How do you think we should avoid exaggerated
expectations for the industry, such as those that occurred in
the low-Earth orbit (LEO) market in the late 1990s?
3. What, if anything, should the Government do or not do to
encourage commercial space endeavors?
What kind of activities does your company include for insurance
purposes in its definition of ``commercial space''?
With respect to ``commercial space'' activities, we include any
space activity which does not directly involve the U.S. Government as
an insured. We address satellite insurance and risk management needs
from ``cradle to grave.''
For us, commercial space begins with the arrival of people or
equipment at the various launch sites, continues through launch,
deployment, testing, and on-orbit operations of satellites through the
end of their expected lives. These are the areas of risk and insurance
where we spend the majority of our time and where satellite owners
spend the majority of their insurance money. The launch itself is
generally the riskiest and most expensive phase of any commercial space
endeavor to insure. In simple terms, our objective is to cover risks of
loss or damage to the satellites, including failure of the launchers,
or failure of the satellite to work according to its specifications.
We also provide liability coverage for damages to third parties
caused by launch related and satellite operational accidents. Again,
commercial space insurance coverage begins with the start of launch
site activities and continues through on-orbit operations. As with the
satellite coverage above, activities prior to arrival at the launch
site are best covered in non-space insurance markets.
We also ensure persons, for example, the lives of various
astronauts and tourists/visitors to the Space Station, including
individuals who fly or have flown on the Shuttle.
From time to time, we also insure contingencies such as acts of
government, and other causes, that could affect the ability to launch
for various reasons.
As insurance brokers, what do you see as the outlook for commercial
space activities in the next five years? Next 10
years? How do you think we should avoid exaggerated
expectations for the industry, such as those that
occurred in the low Earth orbit (LEO) market in the
late 1990s?
As brokers, we see space activities evolving and growing, albeit
not very fast. The world satellite manufacturers and launch vehicle
providers have considerable excess capacity at the moment. There does
not seem to be sufficient demand to absorb this excess in the near
future. For the next several years, it would appear there will be
approximately 15 to 20 commercial launches per year. We see, however,
more human activities in space, the X-Prize being the first of what is
expected to be a significant increase in the number of humans going
into space. I have no doubt that the America's Prize, and, hopefully,
other incentive programs will generate an increase in activities,
although it is hard to determine how long this will take.
Going into space is expensive and involves significant risk. The
implications of the low-Earth orbit projects in the late '90s adversely
affected the financial markets. I have no doubt that the financial
community will demand sound business plans before advancing significant
sums of money. As it is well known, space is very exciting and will be
the subject of much discussion. Unfulfilled expectations can't be
avoided. I do not know whether a solution will exist to deal with the
ups and downs of expectations. Perhaps getting together with the
insurance industry for their opinions may be of value in minimizing the
potential financial risks.
What, if anything, should the government do or not do to encourage
commercial space endeavors?
With respect to government involvement to encourage space
endeavors, I offer the following thoughts.
I would suggest the government maintain the current liability risk
sharing regime of private insurance/government indemnification in
excess of private insurance and cross waivers. This regime was
established in the late 1980s and was renewed last year for an
additional five-year period (P.L. 108-428). This system, in my
judgment, is working very well and has been adopted by non-U.S. launch
service organizations. I know this regime has doubters but failure to
maintain this regime, I believe, in the long run could significantly
harm the U.S. commercial launch business.
I would also recommend that the International Traffic In Arms
Regulations, as regards to commercial space activities, be reviewed to
see if they really achieve what they are meant to achieve. We handle
these matters for some of our clients and the people who review such
matters for licensing and monitoring are doing an excellent job and in
a very timely fashion. The practical impact of these regulations should
be noted. From the insurance point of view, it is important to
recognize that two thirds of the market is located outside of the
country and the same underwriters appear on most of the programs. It
could benefit U.S. industry if the ITAR process can be streamlined.
However, I should point out the whole process is pushing satellite
business overseas as non-U.S. operators find it increasingly difficult
to cope with the process, particularly, in a tough competitive
environment.
I believe the use of government ranges and government purchases of
commercial space related services, where feasible, seems to be working
well. I would defer to others for their comments in this regard.
In this age of deficit spending, I would be hesitant to recommend
additional public expenditure for commercial space projects but perhaps
it could be considered by way of providing seed money for promising new
technology and so forth.
This concludes my testimony. I would, of course, be pleased to
answer any questions. Thank you for this opportunity.
Biography for John W. Vinter
Professional Background:
John Vinter is Chairman of International Space Brokers, Inc. (ISB).
He has been involved with virtually all aspects of satellite business
for over thirty years. Mr. Vinter was appointed to the Department of
Transportation's Commercial Space Transportation Advisory Committee
(COMSTAC) in January 2000. In July 2003, he was appointed as COMSTAC
Chairperson by FAA Administrator, Marion Blakey and assumed the
official duties of Chair at the last meeting in October 2003.
Mr. Vinter founded ISB in February 1991, in conjunction with three
prominent insurance brokerage organizations. Since its founding, ISB
has consistently maintained a 30-40 percent market share in this
business.
From March 1984 to February 1991, Mr. Vinter was responsible for
the space underwriting activities for INTEC (now AXA Space). INTEC was
the underwriting manager for CIGNA and a large number of insurers and
re-insurers worldwide. As Executive Vice President, Mr. Vinter was lead
underwriter for many of the world's major programs. His underwriting
activities were such that INTEC was able to achieve an underwriting
profit six out of seven years and a market share of 20-25 percent.
From August 1976 until February 1984, Mr. Vinter held a variety of
positions with Satellite Business Systems where he was Director of
Administration, Contracts and Procurement. In this capacity he was
responsible for Satellite Business Systems' business transactions
involving contractual relationships with its customers, contractors,
insurers and launching agencies. He was also responsible for the risk
management function of the company. In connection with this activity he
negotiated the contract for the first HS-376 satellite as well as the
first commercial Shuttle launch services agreement with NASA for which
he then purchased the first Shuttle third party liability and launch
insurance.
From July 1968 to August 1976, Mr. Vinter held a number of
management positions within Communications Satellite Corp. in which he
was responsible for the negotiation, procurement and administration of
major satellite and ground system procurements.
Education:
John Vinter has an A.B. degree in Economics from Georgetown
University and a M.S. degree in Telecommunications Operations from
George Washington University.
Chairman Calvert. I thank the gentleman.
Mr. Demisch, you may begin your testimony.
STATEMENT OF MR. WOLFGANG H. DEMISCH, PRESIDENT, DEMISCH
ASSOCIATES, LLC
Mr. Demisch. Thank you, Mr. Chairman.
Mr. Chairman, Members of the Subcommittee, and honored
guests, thank you for the opportunity to appear before you
today. My name is Wolfgang Demisch. I am a principal in Demisch
Associates LLC, a financial consultantcy in the aerospace
sector.
You have asked me to address the outlook of the commercial
space launch business as well as to forecast when space would
attract classic risk-reward investors to succeed the ``angel''
investors, such as Paul Allen, who funded SpaceShipOne that we
see today. The goal is to help the Committee recommend what the
Congress could or should do to encourage commercial space
endeavors as called for in the NASA charter.
Your hearings come at a challenging time for commercial
space. The benefits of commercial space are just embedded in
the economy. They are taken for granted by anybody who goes for
a hike with a GPS, for instance, but they just haven't been
well rewarded in the financial area. To highlight the issue,
over the last four years, essentially all of the world's civil
communications fleet has changed hands for an aggregate price
roughly equal to one-year NASA budget. That has been a
disappointing return for the investors, and that is without
factoring the costs of things like Iridium or Beale or Kistler.
The only consolation is the buyers are probably a roll call of
the smartest investors in the world, people like KKR and
Carlyle and Apollo, and clearly, they see outstanding risk-
reward in space right now, and but notably in the space
communication segment.
The fact that there are smart buyers for space
communication doesn't change the reality that access to space
remains too costly for most commercial endeavors. Price per
pound to low-Earth orbits in the $10,000 class, essentially
unchanged from the $1,000 a pound achieved by the Saturn V in
the 1970s. That translates, incidentally, on a tourism basis,
directly into the $20 million a head paid by the guys who flew
on the Russian boosters, and I might note that that was a
bargain. They didn't pay for life support. If NASA were to do
the same thing, if Congress was encouraging them, they would
probably have to charge five to eight times as much.
So I think the message is space launch is on a much lower
productivity track than microelectronics or computing, and that
is despite Congress's long-term funding support of new space
launch technology: the reusable Shuttle, the commercially-
derived EELV. No savings were achieved. I am unaware,
regrettably, of any credible proposal for substantial cost
reductions. The propulsion breakthrough, which I think would be
necessary in the technical basis to achieve such a
breakthrough, isn't in sight. I think it would be prudent to
set policy on the basis that no substantial launch cost
reductions are to be expected.
It will stay expensive until we get something like the
proposed space elevator that Clarke, among others, has written
about. I think that is a plausible technology, and so I
enthusiastically applaud NASA's Centennial Challenge program,
which will help mobilize the need of talents and materials and
power technology that would underpin that kind of a
transformation. And I think that is worthy of your support, but
in the interim, I think it will remain uneconomic to send up
anything other than information up and down from space. Absent
some astonishingly serendipitous discovery, a cancer cure, for
instance, space access, I think, would grow in line with the
general economy.
And I think the more promising approach to improving the
efficiency of space flight is to accept that it is hugely
costly; about 10 pounds of space payload is equal to one man
year at current engineering rates, and at that price, it is
really worthwhile to invest to shrink the payload weight that
is needed to perform a specific task. NASA has used this
technique with pretty good success to trim the mission costs of
its interplanetary probes. And while it has limitations,
because, you know, antenna size and also people don't scale
down like they might, nevertheless, it is pretty powerful,
especially when you combine several satellites in the station
keeping system to ambulate the performance of a bigger
platform. There is lots of space for better improvement: better
batteries, better solar cells, lighter structures, more
efficient communications, and has direct spinout both to the
military as well as eventually to the larger economy. I think
that that kind of effort deserves your support.
In general, I have to say Congress has been consistently
supportive of commercial space. It has shied away from the kind
of direct operating incentives we saw in the beginning of the
civil air transport industry, but nevertheless, Congress has
been very generous. I consider, for instance, you know, the
duopoly allocation for the satellite radio business or, for
that matter, the enormous frequency allocation, which was
granted Teledesic when they had their broadband project, and
those kind of in-kind supports that is essentially the modern
day equivalent of land grants to the railroads that financed
the transcontinental railroads in the 19th century. I think it
is important, but I think it is inadequate, to catalyze a major
new industry of the scope and stability that is needed to
transform commercial space into the kind of risk-reward
investor as opposed to ``angel'' investor area that you are
seeking. Commercial space today is centered on communications
and broadcasts and the new broadcasts are being brought into
service, like XM Radio and Sirius, and as that happens,
existing services, like DirectTV, get forwarded into larger
media powerhouses and the investment feasts on those
enterprises is not controlled by the space investment. It is
controlled by other factors.
I do think there are other drivers for commercial space
initiatives that respond to Congressional mandates regarding
national security, for instance. It is interesting that right
now there is no effective surveillance of the millions of
containers that flow across our borders. In fact, industry
can't even find about 1/3 of them. So the TSA and Customs have
begun to institute some monitoring. These are big boxes, you
know, I mean, sort of house-sized, able to contain anything,
germ warfare labs. The monitoring doesn't really watch these
trailer-sized structures either while they are in transit or
when they are in the U.S. There are proposals for satellites to
offer that capability to maintain that watch worldwide. It
requires each container be equipped with a suitable black box
that checks its status and reports intrusions. And once that is
there, there is also, of course, obvious commercial spin-offs
from that. You can monitor the environment. You can monitor the
temperature. You can check the--see that the product quality is
maintained. When you have a container of beer and it goes to
160 degrees, it is probably not going to be good beer. But it
also gives you a straight commercial payoff. You can include
the documentation for fast Customs clearance.
That kind of monitoring, I think, will be routine in the
decade, because it responds--is driven by a pressing security
need. There are other initiatives, for example, to switch a lot
more of the air traffic control to satellite-based navigation
and communications. That will take longer. But I think that
getting the infrastructure support, which provides steady and
reliable revenues, that is the kind of thing risk-reward
investors seek and will accept. I think that may begin the
transition the Committee is talking about.
Thank you for your attention. I am available for any
questions.
[The prepared statement of Mr. Demisch follows:]
Prepared Statement of Wolfgang H. Demisch
Mr. Chairman, Members of the Subcommittee, honored guests. Thank
you very much for the opportunity to appear before you today. My name
is Wolfgang Demisch, I am a principal in Demisch Associates LLC, a
financial consultancy oriented towards the aerospace sector and I have
been active in aerospace financial matters since the early 1970's.
You have asked me to address the outlook for the commercial space
launch business, as well as to forecast when space would attract
classic risk-reward investors to succeed the `angel' investors we see
today, investors such as Paul Allen, who funded the Spaceship 1
development. The goal is to help the Committee recommend what the
Congress could or should do to encourage commercial space endeavors, as
called for in the NASA charter.
Your hearings come at a challenging time for commercial space.
While the benefits of commercial space are now so embedded in our
economy that they are taken for granted by anyone who goes on a hike
with a GPS, to give just one example, they have not been well rewarded
in the financial arena. To highlight the problem, over the past four
years, the bulk of the world's civil communications satellite fleet has
changed hands, for an aggregate price roughly equal to one year's NASA
budget. This represents a disappointing return to the industry
sponsors; even without factoring in the additional losses on
restructured projects such as Iridium or the costs of now quiescent
launch ventures such as Beale or Kistler. The consolation, if any, is
that the buyers, firms such as KKR, Carlyle and Apollo, are almost a
roll call of the world's most astute investors. Their actions
demonstrate that they see outstanding risk-reward value in commercial
space, notably the communications segment, where substantial purchases
could be made.
That commitment to space based communications however does not
invalidate the painful reality that access to space remains too costly
for most commercial endeavors.
At present, the price per pound to low Earth orbit is in the
$10,000/lb class, depending on the vehicle. It is not much changed, on
an inflation adjusted basis, from the roughly $1000/lb achieved by the
Saturn V booster in the 1970's. Today's price translates readily into
the $20 million fare paid to Russia by the first space tourists, who
arguably got a bargain, as their life support and training was
included. NASA would have to charge several times as much to cover its
costs, if the Congress were ever to encourage such a use of NASA's
fleet.
Clearly space launch costs are on a much lower productivity track
than the microelectronics or computing sectors. This is so despite
Congress' solid support of cost reduction efforts, first with the
reusable Space Shuttle, then with the commercially derived EELV,
neither of which achieved the savings anticipated. Regrettably, I am
unaware of any credible proposal to achieve the desired substantial
cost reductions. The propulsion breakthrough, which would be a
prerequisite for a much better cost performance, is not in sight. Hence
it would seem prudent to set policy on the basis that no substantial
launch cost reductions are to be expected.
Access to space will stay expensive until we can achieve something
like the proposed space elevator that Arthur C. Clarke, among others,
has written about. This seems a plausible technology. Consequently, I
enthusiastically applaud NASA's Centennial Challenge program, which
will, I believe, help mobilize the needed talents to realize the
materials and power technologies that underpin such a transformative
capability. This effort, although still far from fruition, is worthy of
your consideration in my view.
In the interim, perhaps for the next two or three decades, it will
remain uneconomic to send anything other than information up into or
back down from space. This suggests that absent some astonishingly
serendipitous discovery, a cancer cure for instance, entry to space
will grow about in line with the general economy, rather than some
multiple thereof. It also suggests that there is not much to be gained
from an effort to force feed the launch sector
A more promising approach to improving the economic efficiency of
space flight, in my opinion, is to accept that space payload is hugely
costly, 10 pounds per man-year at current engineering rates. At that
price, it is worthwhile to invest to shrink the payload weight needed
to perform the desired task. NASA has used this technique with
considerable success to trim the mission cost of its interplanetary
probes. While the approach has limitations, because of antenna size and
power requirements, because of packaging constraints as well as because
of people life support needs for manned systems, it is surprisingly
powerful, especially when considering that several smaller spacecraft
can cooperate to emulate the performance of a larger platform. There is
plenty of scope for payload improvement, including better sensors, more
efficient solar cells and batteries, lighter structures and more
efficient communications. The product applications exists in the
broader defense market as well as in space, plus such improvements
eventually find application in the larger economy. While unglamorous,
such initiatives are well suited to the NASA culture and likewise
deserve your continued support.
Congress has been consistently supportive of commercial space.
While it has thus far shied away from the kind of aggressive operating
incentives that early in the last century helped bring the national air
transport system into existence, Congress has been generous, even
beyond the massive launch vehicle investments. For instance, Congress
allowed duopoly positions for the satellite radio business, just as it
blessed the enormous frequency allocation granted Teledesic to support
their space based broadband project.
Such in kind support, reminiscent of the land grants that financed
the transcontinental railroads in the 19th century, remains an
important component for commercial space ventures, but appears
inadequate to catalyze major new industries of the scope and stability
needed to transform commercial space into a risk-reward investor's area
of interest. Commercial space enterprises are currently centered on the
communications and broadcast sectors. While there have been new
services brought into being here, most recently the direct radio
broadcasters Sirius and XM Radio, others such as DirecTV have been
acquired by larger media powerhouses. For these entities, space is a
minor component of the overall investment thesis.
There may however be other drivers for commercial space,
initiatives that respond to Congressional mandates regarding national
security for instance. For example, there is not at present any
effective surveillance of the millions of containers that flow across
our borders. While the TSA and U.S. Customs have begun to institute
some monitoring, both at the point of origin as well as at the port of
entry, there is no watch on these trailer sized structures while in
transit or while in the U.S. Satellites offer the capability to
maintain that watch worldwide, provided each container is equipped with
a suitable black box that checks its status and reports intrusions.
This type of self-assessment is of course readily extended to include
measurements of commercial interest, such as temperature or vibration,
which then facilitates better product quality control, as well as of
course electronic documentation for faster and easier customs
clearance.
Such monitoring will, in my view, be a matter of routine within the
decade, because it responds to a more pressing security need. Other
initiatives, for instance to shift much more of the air traffic control
responsibility to satellite based navigation and communications links,
will take longer to achieve broad acceptance. However, services such as
these, providing critical infrastructure support, appear to be the kind
of reliable revenue generators that risk-reward investors eagerly
accept. They may begin the transition the Committee asked about.
Thank you for your attention.
Biography for Wolfgang H. Demisch
Mr. Demisch is an owner of Demisch Associates LLC, an aerospace
financial consultancy. He has over 30 years experience as an analyst
and banker in the Aerospace and Technology sectors. While a research
analyst covering aerospace and computer technology, he frequently was
ranked a leader in these fields by Institutional Investor Magazine. He
later established and managed the U.S. Equity Research department for
UBS. He subsequently moved to the investment banking side of the
business, where he helped implement transactions such as the 2002
purchase of GE Americom by Societe Europeenne des Satellites. He has
served on the NASA Advisory Council and numerous NASA panels, including
small satellite technology, space station alternatives and commercial
uses of space. In 2003 he established Demisch Associates LLC to provide
advisory services for investors considering acquisitions in the
aerospace and technology sectors. A frequent guest on financial TV and
speaker at industry meetings, he is a member of Wall Street Week with
Louis Rukeyser's Hall of Fame. He has served on the Board of Directors
of SAIC, an employee-owned professional services company, since 1991.
He is a graduate of Princeton University and the Harvard Business
School.
Chairman Calvert. Thank you.
Dr. Macauley, you may begin your testimony.
STATEMENT OF DR. MOLLY K. MACAULEY, SENIOR FELLOW AND DIRECTOR,
ACADEMIC PROGRAMS, RESOURCES FOR THE FUTURE
Dr. Macauley. Thank you.
Good morning, Mr. Chairman, and Members of this
subcommittee. Thank you for the opportunity to join you today.
Much of the discussion this morning has centered on getting
things and people into space. I have been asked to broaden
discussion a bit to consider these as well as other kinds of
activities included in the commercial space industry. I have
also been asked to discuss U.S. leadership in these activities,
and probably most important, the role of government, including
what government should not do in encouraging commercial space.
My written comments address all of these three topics, and
they have some very specific discussion of past regulatory and
legislative initiatives, the legislative initiatives taken and
spearheaded by this subcommittee. And the testimony also has
some detailed discussion about directions for the future.
So, in the interest of time, I will just summarize the
general themes here.
And I offer my comments with a great deal of humility. I am
not a pioneer in building space technology and making a
business work like my colleagues this morning. So I offer my
comments with humility. What I and other analysts try to do,
though, is innovate in the case of public policy. And actually,
in the past couple of years, there has been a great deal of
innovation in public policy in the U.S. Government at the
Federal, State, and local level, and these have direct
applicability to space policy making.
Generally, they are incentive-based approaches. They
generally work. They generally work well. In particular, what
they try to do is to minimize the costs imposed on industry,
but, at the same time, do some of the things government is
supposed to do, such as protecting the environment to some
degree, providing some reasonable amount of worker or consumer
safety, generally provide opportunities but without dictating
choice, and in short, to balance the interests of the taxpayer
with specific interests of industry.
So some of these examples of policy innovations, say, in
the last decade have been highly successful tradable permits in
the case of industries that have to meet environmental
regulation, auctions of portions of the electromagnetic
spectrum by the Federal Communications Commission to improve
access to and use of spectrum, vouchers to permit consumer
choice, the move towards performance standards meeting a level
of overall performance rather than government dictating exactly
how every nut and bolt used by industry should comply with
safety regulations, and of course the role of prizes and cash
incentives.
I think it is very important to point out that government
policy making for space in the form of Congressional
legislation, again spearheaded by this subcommittee in the
past, as well as some presidential policy directives and some
regulation of various commercial space activities has, in many
cases, already promulgated incentive-based policies like these.
We already have on the books some provisions for space
transportation vouchers. In some cases, we are moving towards
performance standards. There are provisions for government
purchases of Earth and space science data and space
transportation services and now, most recently, we are
experimenting with prizes. In all cases, the statutory intent
has been to support commercial space.
Now to be sure, not all of these initiatives have worked.
The example perhaps most notable is the attempt to transfer to
commercial operations. But the policy experiments are being
attempted. And in terms of government's future role, I
recommend that a philosophy of incentives like these and
sometimes established as experimental or demonstration policy
programs, the counterparts to technology pathfinders underlie
future approaches.
In the interest of quickly summarizing my other comments,
let me use two examples.
The first. Recently Google joined with a company called
Keyhole to offer three-dimensional maps on our PCs and our
BlackBerrys for finding things ranging from street directions
to restaurants to ATM machines. For some neighborhoods, these
maps are so detailed, you can see your neighbors' trashcans.
But the real advantage of Google and Keyhole is that the maps
are easy to use and they are very well annotated. Even though
the underlying satellite imagery and aerial photography data
can consist of many terabytes, they are very complicated to
manipulate and geographically rectify these data, and they are
very hard for a consumer not trained in photogrammetry, let
alone map reading, to understand. The factors, then, are these:
ease of use, low-cost ease of use, annotation, and a corporate
partnership that brings with it, ready-made, a large consumer
market.
The second example. A newcomer to commercial space is
satellite radio, XM and Sirius. They had to obtain FCC licenses
and frequency allocations, contract for commercial launch
services and insurance, obtain permits for and then install and
maintain an initial network of hundreds of terrestrial
repeaters for ground coverage in drop-out areas. They also had
to design and test radio antennae and in-car technology. Then
they had to attract GM, Honda, Sony, Wal-Mart, Best Buy,
Circuit City, and RadioShack for their supply and market
chains. And they still weren't done. They needed programming.
They needed content. So they are signing up Major League
Baseball, NASCAR, CNN, Fox News, and Howard Stern, literally
hundreds of kinds of programs.
The points of these examples are these.
Businesses can succeed or fail despite of or independent of
space policy. Commercial space success depends as much on the
usual business challenges: strategy, customer relations,
contracting practices, understanding consumer markets, as on
challenges that are space unique. Space businesses also depend
on innovation in non-space commercial markets, like
electronics, information technology, entertainment,
automobiles, retail services. And space businesses also face
policies related to export restrictions, as have been mentioned
earlier, national security concerns, and regulation in
financial, environmental, occupational, and employment sectors.
And a good space policy, I think, will be familiar with
these other pressures brought to bear on our U.S. industry to
understand the big picture of what space business in this
context is all about.
So in conclusion, I would just like to say that I think to
confer with the titans of space industry, as we have done
today, is essential for good policy making. It may also be
useful to confer with titans in other types of U.S. industries
that are directly related to the success of our space
businesses. And finally, good space policy is necessary, but it
won't always be sufficient for business success nor at fault
for business failure.
Thank you.
[The prepared statement of Dr. Macauley follows:]
Prepared Statement of Molly K. Macauley
Good morning, Mr. Chairman and Members of the Committee on Science,
Subcommittee on Space and Aeronautics. I am Molly K. Macauley, a Senior
Fellow at Resources for the Future (RFF), a research organization
established in 1952 and located here in Washington, DC. RFF is
independent and nonpartisan, and it shares the results of its policy
analyses with members of all parties in the executive and legislative
branches of government, as well as with business advocates, academics,
members of the press, and interested citizens. My comments today
represent my own views, it should be noted, and not those of RFF, which
takes no institutional position on legislative or regulatory matters.
My training is in economics and I have worked as a space analyst
for 20 years. I have written extensively about space economics and
policy, serve on numerous NASA and National Academy of Science panels,
and have had the opportunity to meet with your committee several times
in past years. Thank you for the opportunity to meet with you today,
Mr. Chairman. I am honored to be part of this distinguished panel.
Moreover, I am grateful that you are seeking perspectives about the
role of government in space commerce.
I've been asked to consider these topics: the kinds of activities
included in ``commercial space;'' U.S. leadership in these activities
and the outlook during the coming years for the industry; and the role
of government, including what government should not do in encouraging
commercial space.
My overall observation is that U.S. commercial space policy to date
has been appropriately supportive of U.S. industry and sets a good
precedent for the future. The interests of the taxpayer and industry
are most likely to flourish mutually by way of a conservative approach
to legislative and regulatory intervention, coupled with an innovative,
incentive-oriented philosophy. I also recommend the usefulness of
demonstration or pathfinder, experimental approaches to policy.
WHAT KINDS OF ACTIVITIES ARE INCLUDED IN ``COMMERCIAL SPACE?''
Some of the promise of commercial space has been more than
realized, accompanied by new and perhaps unexpected consumer markets.
Some promise has been less successful, often for a variety of reasons
independent of government actions.
Looking backward for just a moment is useful. A decade ago, the
Wall Street Journal and USA Today had vastly expanded their geographic
distribution by a new method: using satellites to transmit the papers
to local printing presses across the country for early morning
publication. The satellite distribution technology was so novel that
the papers included at the top of their front page, ``Via Satellite,''
to impress upon readers that the news was hot off the press even if the
news had originated thousands of miles away. A much more routine use of
space by the commercial media was the satellite pictures of cloud cover
and hurricanes on the daily TV news. In another routine use of space,
telecommunications companies routed some long-distance telephone calls
by way of satellite, although microwave or undersea fiber optic cable
sent most calls. Satellites also enlarged the market for cable
television. Sometimes to the dismay of neighbors, many consumers had
erected large satellite dishes in their yards to receive cable TV.
Reflecting the by-then wealth of experience of commercial satellite
makers in serving these markets, Fortune magazine, in its list of ``100
Things America Makes Best,'' included communications satellites by
Boeing.
In another related market, the satellites supplying these services
were commercially launched, fueling the commercial space transportation
industry. In other markets, some bulky, expensive, and complex global
positioning satellite (GPS) receivers were finding use in ground
surveying and in navigation for civil aviation. The entrepreneurs
proposing the first commercial remote sensing space system worked with
policy-makers to forge entirely new regulatory and legislative policy
to obtain licenses for their service and were preparing for launch.
There were also business plans for markets in space burials and for
commercial materials processing on the Shuttle and Space Station.
Today, just a decade later, the novelty of commercial
communications satellites has worn off so that the newspaper covers
don't remind readers of the transmission technology (although the
technology is still essential and new comsats are routinely launched
for existing and new services). Residential satellite dishes are much
smaller and hardly noticeable perched on apartment balconies and
corners of rooftops. There are now some thirty-two commercial satellite
operators around the world. They support 176 million Americans for whom
cell phones, pagers, BlackBerrys and high-speed connection to the
Internet are as essential as a morning cup of coffee. Most of these
services use at least some satellite relays in addition to terrestrial
network technologies. Backpackers and passenger cars carry lightweight,
increasingly lower cost, and highly capable GPS receivers. Satellite
radio receivers are in cars, homes, and boats and hand-held satellite
radios accompany joggers. XM Satellite and Sirius Satellite radio
companies along with SpaceShipOne are the most prominent among new
entrants in commercial space markets. XM has just announced that it is
also joining with AOL for Internet radio service. Both XM and Sirius
point out that after eighty years of AM radio and sixty years of FM
radio technology, their digital technology offers the first new radio
broadcast medium.
In the case of commercial space remote sensing, industry is
struggling financially. For a variety of reasons, the industry has had
trouble building a civilian consumer market and has instead relied
heavily on sales to government, including contacts for data purchases
by the National Geospatial Intelligence Agency and other national and
foreign government security departments.
But the recent acquisition by Google of Keyhole Corporation, a
California-based digital mapping company, is a new and promising
direction for remote sensing. Keyhole uses satellite and aerial maps
and, most important, easy-to-use software. A person (untrained in the
complexities of photogrammetry) can zoom-in for detail on satellite and
aerial pictures by way of a personal or laptop computer and even
simulate 3D maps to find hotels, parks, ATMs, and subway stops at home
or when traveling. One reviewer noted that in some cases a consumer can
even zoom in enough to see a neighbor's trash cans. In remote sensing,
then, companies are finally treating the market not as ``users'' but as
``consumers.'' Keyhole, together with the innovative software known as
Ajax that manages the complexity of all of the data and interfaces
between hardware and software components, simplifies and annotates
otherwise complicated digital imagery.
In the commercial space transportation industry, ideas and
technology have moved from conventional rockets to an innovation like
Sea Launch, and from unmanned commercial vehicles to the promise of
SpaceShipOne in serving payloads in the form of people not packages.
These examples of satellite radio, the Google-Keyhole arrangement,
and innovations in space transportation technology and markets
represent a particular and significant development relevant to
Congressional and public policy perspectives on commercial space. This
development is the hard work of industry in blending space-based
technology with existing technologies and markets on Earth, complete
with having to comply with the regulations that govern those
technologies and markets. In other words, commercial space is not a
stand-alone industry and it can succeed or fail on market conditions
and other public policy wholly independent of commercial space policy.
By way of illustration, satellite radio had to: obtain FCC licenses
and frequency allocations; contract for commercial launch services and
insurance; obtain permits for and then install and maintain an initial
network of 800 terrestrial repeaters for ground coverage in drop-out
areas; design and test radio, antenna, and in-car technology; attract
GM, Honda, Sony, WalMart, Best Buy, Circuit City, and Radio Shack,
among other companies, to build its supply and market chain; and sign
up major league baseball, NASCAR, CNN, Fox News, Howard Stern, and
other programming. No space technology has a stand-alone supply network
or consumer market.
U.S. LEADERSHIP IN COMMERCIAL SPACE--STATUS AND OUTLOOK
Most experts contend that some of the best commercial space
products as well as significant innovation continue to come from U.S.
companies. But these observers also acknowledge that ``U.S.-made'' can
be misleading. For instance, companies routinely employ foreign-born,
U.S. trained engineering talent. In addition, increasingly, and due in
part to export restrictions, markets are typically larger for U.S.-made
components rather than entire finished products.
Space-related markets are markedly more competitive than in past
decades. Space transportation markets now include suppliers in Europe,
China, Russia, Ukraine, Japan, and India--all now offer commercial
launch services. Israel and Brazil also have their own launch
capability. According to data maintained by the Office of Commercial
Space Transportation in the Federal Aviation Administration, in the
past ten years, the U.S. share of the worldwide commercial launch
market has averaged about 30 percent to 40 percent of total launches
and about a third of total revenue (of a $1 billion total market in
2004, the U.S. share was about $375 million). The total number of
launches in the past five years has been smaller than in previous
years, largely due to longer-lived satellites and a decline in the
number of small satellites launched to nongeostationary orbit. For
example, in 2004, U.S. companies launched six out of a total of 15
worldwide commercial launches.
Joint arrangements between U.S. and foreign companies are
increasing. For instance, Boeing has a share of launch revenue from its
partnership in Sea Launch, which had three launches valued at $210
million in 2004. In commercial remote sensing, U.S. companies have
entered into distribution agreements to market foreign data from SPOT
and Radarsat.
The international mobility of engineering talent, increasing
activity by other countries in commercial space launch markets, and
joint arrangements such as those noted above are trends that are likely
to continue in coming years. During 2004-2013, the Office of Commercial
Space Transportation expects a total of about 23 commercial launches
per year, on par with past years. Industry trends may include
continuing coupling of space-based and ground-based technologies and
markets--the ``XM'' model. Commercial companies have also proposed the
first commercial deep space science mission and commercial space
operations and telemetry, tracking, and control systems. In the case of
Earth observations, a major initiative impelled by the G-8 heads of
state in June 2003 has led to a ten-year plan for an integrated global
Earth observation system (GEOSS) among the governments of more than 30
countries. A separately established organization is working closely
with industry to identify opportunities to support GEOSS in the coming
decade.
WHAT MIGHT GOVERNMENT DO (OR NOT DO) TO ENCOURAGE COMMERCIAL SPACE?
The Congress and executive branch have generally been extremely
supportive of commercial space. The legacy of policy initiatives to
nurture the industry is rich with examples. Table 1 lists key
legislation, regulation, and policy directives that have included
provisions specifically addressing commercial space. These initiatives
have included (but not been limited to) a host of innovative, market-
like approaches: vouchers to fund launch purchases by space science
researchers, to enable them to choose a launch vehicle best tailored to
their payload; government purchases of Earth and space science data and
launch services; and most recently in the Commercial Space Launch
Amendments Act of 2004, initial steps toward allowing private and
commercial passengers to undertake space travel.
The twenty-year legislative and regulatory history of commercial
space has generally and been responsive to industry concerns. To be
sure, not all initiatives taken so far have worked in practice. For
example, transferring the land remote sensing system (Landsat) to
private operation or identifying a commercial company to build and
operate a follow-on system (the Landsat Data Continuity Mission) did
not work out for a variety of reasons. However, the policy emphasis on
data buys has formed the basis for the purchases of commercial space
remote sensing data under contracts worth about $1 billion with
national security agencies. By way of the Centennial Challenges
project, the National Aeronautics and Space Administration (NASA) is
now offering prizes for space technology development. NASA also has
funding in its FY 2006 budget request for commercial transportation of
crew and cargo to the International Space Station.
In the future, consideration could be given to potentially strong
incentive-oriented approaches when government oversight of commercial
space activities is deemed necessary. These approaches include
financial incentives, performance standards that nurture adoption of
alternative technologies rather than requirements that specify
technologies to achieve performance, rational pricing policy for access
to government assets, and reliance on private markets for insurance
when appropriate. Table 2 lists market-like policies that have been
taken or are currently used, or that might be used in the future in
designing space policy. These approaches include performance standards,
prizes, private market insurance, auctions, voucher, and government
purchases of commercially produced goods and services. The objective of
policy options such as these is to encourage flexibility, discourage
government intervention when private institutions (such as insurance
markets) could suffice, and ensure a ``fair playing field'' between
government space and commercial space activities.
I know from Chairman Calvert's recent comments at the 21st National
Space Symposium this month that there is concern about sectors of the
U.S. space program working in isolation from the others. These sectors
would include the civil, national security, and commercial space
activities. This is a familiar problem. For instance, in the case of
energy policy, the Department of Energy, the Federal Energy Regulatory
Commission, the U.S. Nuclear Regulatory Commission, the National
Highway Safety Administration, the Environmental Protection Agency, and
the Minerals Management Service all have great influence on energy
markets. These agencies' decisions affect what fuels are used to
generate electricity, what fuel efficiency targets cars must meet, what
mixtures of gasoline may be sold, and where oil and natural gas can be
produced.
Our space and space-related agencies now range from the national
security complex to NASA, the Department of Interior and the U.S.
Geologic Service, the Department of Commerce and the National Oceanic
and Atmospheric Administration, the Federal Aviation Administration,
and the Federal Communications Commission. The Departments of State and
Energy, together with the Department of Commerce, are key champions of
the GEOSS program (described above). The Department of Energy also
plays a role in space power systems.
To some extent, our space sectors have mutually benefited from this
mix. For instance, GPS is owned and operated on the defense side but
routinely used by the civil and commercial sectors. Remote sensing/
Earth observation information was championed by NASA and the
infrastructure, data, R&D, data validation, and information products
from NASA's Earth science activities over four decades are routinely
used by the defense and commercial sectors. Commercial satellite
telecommunications were advanced markedly by industry but are routinely
used by the defense and civil sectors.
Some steps could be taken to better integrate the large scale and
scope of government space and space-related activity. For instance,
establishing prizes for innovation of use to all three space sectors--
civil, commercial, and national security--makes sense provided all
three sectors have at least a few desirable innovations in common.
These requirements could range from space transportation to space-based
navigation for on-orbit activities that may include autonomous
refueling and repair. They may also include developments in Earth
science in mapping and meteorology, for which prizes could be offered
for new and faster algorithms to turn data into actual information
products for the battlefield or the oil field (for geologic
exploration). These prizes could be jointly funded and developed by the
civil and national security sectors with input from the commercial
community.
Another step, and one that has been taken in the past, is
establishment of a space-dedicated cabinet council. In the past, such
an effort has been inadequate to overcome differences in goals,
leadership and decision-making. Nor did previous interagency efforts
adequately include provision for industry representation, which if
optimally designed would include representatives from ``other than the
usual suspects'' by seeking participation of non-space companies
(perhaps WalMart, Microsoft).
SUMMARY OBSERVATIONS
Some of the alternatives outlined in Table 2 address different
types of risk (financial and safety), export issues, and other topics
not addressed at length in this testimony. With these omissions in
mind, some general guidelines for public policy and commercial space
include:
-- Balance financial risk taken by industry compared with
asking the public to underwrite risk (for example, in the case
of upcoming deliberations on continuation of commercial launch
indemnification)
-- Balance personal risk taken by crew, passengers, and third
parties in commercial space transportation
-- Maintain familiarity with the non-space commercial markets
upon which commercial space relies (for example, computing
hardware, software, wireless connectivity, telecommunications
capacity enhancements and cost reductions, consumer retail
markets)
-- Routinely seek out the opinions of non-space industry
leaders in information technology, telecommunications
technology, entertainment, automobiles, education, retail
services, and other consumer markets to appreciate the larger
context in which commercial space operates
-- Intervene when necessary and appropriate in legislative and
regulatory policy in non-space commercial markets upon which
commercial space relies (for instance, spectrum and orbital
access, environmental and occupational safety/health
regulation)
-- Balance export policy, national security concerns, and
other restrictions on international trade in space goods and
services
-- Build or build-on inter-agency relationships among the
myriad government offices that are involved directly or
indirectly in space technology, policy, and operations
-- Acknowledge that commercial space success depends at least
as much if not more on normal business challenges (business
strategy, customer relations) as on challenges that are space-
unique or that pertain to government commercial space policy
-- Accept that some commercial ventures will fail
independently of supportive legislative, regulatory, or other
policy
In conclusion, the supportive legacy of U.S. commercial space
policy has set a good precedent for the future. The interests of the
taxpayer and U.S. industry are most likely to flourish mutually by way
of a conservative approach to legislative and regulatory intervention,
coupled with an innovative, incentive-oriented philosophy amenable to
demonstration or pathfinder, experimental approaches to policy.
Biography for Molly K. Macauley
Dr. Macauley is a Senior Fellow at Resources for the Future in
Washington, DC. Her research focuses on economics of and policy issues
in space transportation, Earth science and remote sensing, space risk,
space debris, space power technology, and the roles of the government
and private sectors in space. She has published over 50 articles,
lectured widely, and testified before Congress on these topics. Dr.
Macauley also chairs the Board of Advisors of the Thomas Jefferson
Public Policy Program at the College of William and Mary and has served
on the Board of Directors of Women in Aerospace. She is a member of the
International Academy of Astronautics and the Aeronautics and Space
Engineering Board of the National Academy of Sciences, and has been
honored by the National Space Society as one of the Nation's ``Rising
Stars'' in space policy. She has also received commendation from the
National Aeronautics and Space Administration for contributions to
development of commercial space remote sensing. In addition, Dr.
Macauley spearheaded the Space Shuttle flight of replica of a standard
of George Washington; that standard is now on display at Mount Vernon.
Dr. Macauley has taught for many years in the Department of Economics
at Johns Hopkins University and consults for a variety of aerospace and
other companies. She has a Bachelor's degree in economics from the
College of William and Mary and Master's and doctoral degrees from
Johns Hopkins University.
Discussion
Cost of Access to Space
Chairman Calvert. Thank you. Thank you for your testimony.
Mr. Musk, as I was listening to the other testimony, I
noticed an emotional response at one moment where Mr. Demisch
said that we should set policy on the basis that no substantial
launch cost reductions will be expected. And I know from
discussions with you, you hope to reduce those launch costs
through your business. So I thought I would give you an
opportunity to comment on that.
And since you are one of the newest entrants into the
launch market, based on your experience, how would you
characterize the U.S. Government's regulation of the launch
industry, in general? And what should the government possibly
do to enable this industry to succeed?
So with that, I will----
Mr. Musk. Certainly. Well, I think the fact that we are
offering the Falcon I launch vehicle at a price of
approximately $6 million, which, thanks to the current U.S.
dollar, is quite a bargain on the international market. We are
actually--we only cost, effectively, about three million
pounds. The--this compares with the next best U.S.--or the next
best U.S. launch vehicle being the Pegasus from Orbital
Sciences, which has a NASA list price of about $30 million. Our
vehicle does 50 percent more payload, has a better payload
environment, has more volume. In fact, on every meaningful
dimension, it is superior and yet it is about 1/5 of the cost.
So I think that is, you know--clearly indicates that
significant improvement is possible. We expect to do the same
thing with our medium-lift vehicle, Falcon V, and we expect to
make some announcements about a heavy-lift vehicle in the--
later this year and with similar price reductions on the order
of four to five over the current U.S. launch vehicle costs. And
those we consider starting points. We are going to go down from
there.
As far as the--what the U.S. Government can do as--from a
regulatory standpoint, you know, I think there is currently a
fairly large body of regulation regarding expendable launch. It
is quite onerous. It adds quite a bit to our cost per launch.
And I think the U.S. Government should do its best to minimize
and constantly be trying to reduce that body of regulation.
Regulation just tends to--it is like atrophy. It just keeps
growing. Unless there is an active force to contain it, it just
gets worse and worse every year.
And then to the point that I mentioned in my testimony, I
think we really need to do something about ITAR. I think that
is really harming the U.S. industry.
Chairman Calvert. Yeah, I am going to give you the
opportunity to answer a question.
There are people, and you have probably heard this, Mr.
Musk, because of your own considerable personal wealth, I heard
the phraseology ``angel.'' You are probably considered one of
those folks, and that--you know, you have more capability
financially than most to do this that--are you in this for the
business, or are you in this--because, you know, I am sure you
heard this behind your back, are you in this for a hobby? So I
want you to have the opportunity to answer this question for
the record, because----
Mr. Musk. Certainly.
Chairman Calvert.--I think you should--you deserve that.
Mr. Musk. I certainly--well, if it is a hobby, it is the
most expensive hobby I could possibly conceive of. You know, in
fact, the--I have--there is a joke in the space industry, which
is how do you make a small fortune in the launch business, if
you start with a large one? And I have heard that joke so many
times that I started to--just for amusement, when people ask me
why I started the company, I would say, ``Well, you know, I had
a large fortune, and I was trying to make it small very
quickly, and this seemed like a good way to do it.''
But the serious answer is that this really is a business,
which I expect to be really quite profitable. I think we could
hit a positive cash flow as soon as the--late this year or
early next year, which would mean that, if we were able to do
so, we would have achieved positive cash flow in our third or
fourth year of operation, which is unusually good for any
business, and I would say particularly good for the launch
business.
So I think I am really quite convinced that there is a
solid business there. You know, we are doing our best to
solicit business throughout the world. You know, we--the
Malaysian launch, we competed against the Russians for that and
won. You know, that was a tough one. We have got a couple of
other international launches we expect to win. We are working
hard to earn NASA business. So I am--we are trying to get as
much business as possible in order to drive that cost even
lower than it is today.
Chairman Calvert. Thank you.
Mr. Rohrabacher.
Mr. Rohrabacher. One thousand dollars a pound on Saturn V?
Is that in today's dollars or then-dollars?
Mr. Demisch. Then-year dollars.
Mr. Rohrabacher. Then-dollars? So it is----
Mr. Demisch. So adjustment for inflation, it is about
$10,000.
Mr. Rohrabacher. So it is about the same, then?
Mr. Demisch. Yeah, it hasn't--things haven't changed much.
I think if Mr. Musk can achieve the kind of overhead reductions
that I think are necessary to get the costs down to something
which is a little bit closer to materials and engineering
content, it would be a tremendous gain. It hasn't been possible
for any of the other players, maybe perhaps because of
regulatory issues, but----
Mr. Musk. If I--this is an interesting point, which I
suspect that members may not be aware of.
Do you know what the cost of propellant is on our rocket?
Propellant is usually the dominating cost. It--you know, gas--
jet fuel is the dominating cost in airliners. The cost of
propellant for our rocket is $50,000 a launch. That shows you
there is a huge amount of room for improvement. And we should
be getting to the point where that cost actually matters as
opposed to being an accounting error on the launchcrafts.
Mr. Rohrabacher. Well, of course--Mr. Musk, how old are
your children now?
Mr. Musk. They are one.
Mr. Rohrabacher. I am--you have two babies that are one,
and I have three babies that are one week from being one. Now
do you foresee our babies being able to go to college on the
Moon?
Mr. Musk. Well, I think college on the moon may be
challenging, but if they can actually have the potential to go
there at all, that is really part of what I am working hard to
try to achieve is that there should be the possibility that,
you know--that any citizen can go to space, go beyond orbit,
even to the Moon and going to Mars. I think it would be really
a very dismal future where that possibility was closed.
Mr. Rohrabacher. I noticed when the other panelists were
talking, there was a lot of--I am sorry. You did sound a little
pessimistic, sir, but--about the development of technology and
overcoming this, but I think that what we hear from Mr. Rutan
and Mr. Musk, who are on the business end of this, is that the
technology development will be there. They are confident. I
mean, I noted confidence in both Mr. Rutan and Mr. Whitehorn in
terms of technology. What they don't seem to be confident in is
government policy that will permit them the type of technology
development to overcome problems.
Mr. Demisch. I think that I will defer to Mr. Musk in one
nanosecond, but the challenge really has been that there are--
we are living with the same technology in space propulsion and
have, really, since--probably the Shuttle is the most advanced
engine of any space vehicle currently flying. And so that sets
your underlying engineering merit. And then the question is how
cheaply can you build it. And that then becomes a question of
how costly and complicated is it and what is your overhead
weights on your people and all of the rest of these things.
Mr. Rohrabacher. You know, I think every time that
humankind has said that, they have been wrong. And let me just
note, and Mr. Rutan is not on the stand now, but I will never
forget when he talked about when he--I had a group of people
there to hear a lecture by him in my District, when he talked
about how he has changed the way that there is re-entry and how
that the implications on that--of that. I mean, this is not
just a mechanical change. It is actually a change of concept.
Mr. Demisch. I think Mr. Rutan is a genius in aviation. I
think that that is--I bless his efforts, and I hope that this
committee can encourage NASA to give people like him a lot more
space in the aeronautics arena, because it--God knows it needs
it, where industry would just be fading before our very eyes in
terms of employment and so on. It would be nice if we had
people like Mr. Musk in the space frontier. All I am saying is
the underlying technical merit of the boosters hasn't changed.
The only real way for drastic improvement is something
completely different, like an elevator. That I think is
technically doable over time. So it is not there yet, but at
least it is conceptual.
Mr. Rohrabacher. Well, that is--there is a revolutionary
idea: the elevator into space. But let me know. I never looked
at that.
Thank you.
Mr. Chairman, if you would just indulge me one more note,
and that is that what we have heard today is that there are
some things we can do, and the--Mr. Musk has made it very clear
that export control is--as our witness of the first panel
mentioned export control, I--and we are talking about people
who understand the importance of freedom here and are not
suggesting that we do anything that puts our country in
jeopardy by making these technologies available to potential
enemies. But I think it behooves us and the Subcommittee to
become a force, as I have tried to be, in the international
relationships to try to push these barriers aside for countries
that are friendly to the United States and pose no future
danger to us. And it is something that we could do that would
really help these folks out. This is one of the regulations----
Chairman Calvert. And I would be happy to work with you on
this. I am on the Armed Services Committee, and you are on the
International Relations Committee. We--and this committee. We--
between that, we ought to be able to work out some streamlining
to make this process work a little more simpler.
Mr. Rohrabacher. And one on--other note is that Mr. Musk
did, I would like to note, mention the concept of prizes as a
means of developing new technologies. And I have a bill for
that, and I would hope our new head of NASA, who we are all
mystic about, he also takes a positive view towards that
approach, and perhaps we could work something out, and move in
that area as well in developing new technologies by prizes for
them rather than having the government bureaucracy telling
people how to turn the screws and seeing the actual development
process.
So thank you very much, Mr. Chairman.
Emerging Space-based Markets
Chairman Calvert. I thank the gentleman.
I am going to have a question for all of the panelists.
And looking into the future, do you see evidence of newly
emerging markets or products that will rely on space-based
assets? And if so, what might they be? And we will put it
another way. Are there products or services coming into the
marketplace in the next five to 10 years that are likely to
spur the additional space-based infrastructure?
And I think I will start with you, Mr. Musk, and just head
on down the panel.
Mr. Musk. Sure. I think that there are a couple trends that
I see. One is in the small satellite arena of doing things with
the smaller, lower-cost satellites rather than with gigantic,
very expensive satellites. I think we are seeing that trend. We
are certainly seeing that trend and the interest in our small
launch vehicle. I think as the--as time goes by, there is
greater and greater interest in more broadcast, more
communications, more exploration. I see a--really a very
positive future for space. And it is--for those that are
pessimistic, I think it is--bearing in mind that space is a
very cyclic business, and so when--and once--people are prone
to become very optimistic at the top of the cycle and very
pessimistic at the bottom of the cycle. And you need to
remember that it is a cyclic business.
Chairman Calvert. It sounds like real estate.
Mr. Musk. Yeah. Buy low, sell high.
Chairman Calvert. Mr. Vinter.
Mr. Vinter. Yes, sir.
I echo what Elon is saying about small satellites replacing
big satellites. The big satellites have proved to be very, very
difficult to produce, taking three and four years to get out of
the factory, whereas the smaller ones could come out in a year
or a year and a half. So that is definitely a trend.
There is also, I think, going to be a big interest in so-
called KA band, and this is an application where there is
interaction, you know, back and forth over the Internet. And we
are seeing a number of people today who are really interested
in KA band. And there are a couple of experimental packages
that--and one operational package already flying with us. And I
think that if it takes off, it will be--probably very
interesting.
Mr. Demisch. I think that there is still a tremendous
opportunity for growth, or just start off with trying to use
your cell phone. I mean, the service is still terrible any way
you slice it, and so there is need for a better service, and
the only way you really get it is to have it coming down from
above rather than from the buildings on the side. And the other
thing is, of course, I think the kind of really high-speed
mobile links, as you sort of start to see TV on your cell phone
and so on, again, the best place to do it is from up above. I
think the underlying concept that was behind Teledesic remains
sound, and I don't know that their business plan is close to
being resurrected, but a lot of work has been done there. And I
think that that is going to see a lot more future. And the
other thing is I just think that the combination of
surveillance and tracking for monitoring and national security
purposes is, in fact, going to be a large growth market over
the course of the coming decade.
Dr. Macauley. I come from a research organization where my
colleagues specialize in agriculture, energy, water, and I
argue with them, and they are gradually coming to agree, that I
think that space is every bit as an important and natural
resource as those. And it is a natural resource that is really
unique. It is an incredibly unique environment. It has
fundamental attributes that make it a very difficult place to
be for a long period of time, but nonetheless it is a resource
that we are still learning a lot about. And I remember eight
years ago when we would get USA Today or the Wall Street
Journal, right under the headline, it said, ``via satellite,''
which meant in order to get these newspapers to remote places
around the world in time for people's morning coffee, the text
of the newspapers was sent via satellite to regional printing
presses. And now we don't see that underneath the Wall Street
Journal or USA Today. They are still using that technology, but
it is embedded so much in our way of life, and similarly with
much of our communications activities. So space, as a place
through which to bounce signals, is very much a part of our
life. Will it ever be a place where we turn to the dreams of a
decade ago of doing materials processing? I remember hearing,
similar to those today, where we had entrepreneurs thinking
about space as a unique environment in which to do some very
interesting materials processing. And then what happened was
when 3M and other companies stepped up to the plate to try it
out, it took so long to get there, to get through the process
of getting your assets into space and getting the experiments
done that we had accomplished the innovation here on Earth much
more quickly.
So once we get to space more quickly and can stay there for
sustained periods of time routinely, we may see some of those
visions, which were very visionary, recycle back. And then
today, the extensive discussion about not just a place through
which to bounce signals but a place to actually send us all
and, perhaps, someday to live, if not visit. I think that--
yeah, I think the future of space is very bright, subject to a
lot of other things that have to happen in a business sense to
make it work and subject to sound government role.
Chairman Calvert. Well, thank you.
And I want to thank this panel. We are living in an
exciting time, and I am looking forward to working with all of
you in the future. And I am looking forward to, Elon, coming
out to your launch here shortly, and I wish you all of the
success in the world.
And I, again, thank this panel for coming today. We are
adjourned.
[Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]
Appendix 1:
----------
Answers to Post-Hearing Questions
Responses by Burt Rutan, Scaled Composites, LLC
Questions submitted by Representative Mark Udall
Q1. As you understand it, what steps will you have to go through to
get the commercial version of your spaceship approved for commercial
service by the FAA? Which office of the FAA will you be coordinating
with?
A1. In my opening remarks I did outline what I believe the proper steps
for government approval of commercial spaceships. My handout also
included more detail on the subject and is attached for your reference.
(See Attachment)
Q2. In your testimony you indicated that you have a number of proposed
changes to the licensing process that you think would make sense.
Please provide your proposed changes for the record.
A2. Our main emphasis is that FAA needs to staff the regulatory office
with personnel experienced in the research testing and certification of
commercial aircraft. These personnel are found at AVS, not at AST.
Questions submitted by Representative Sheila Jackson Lee
Q1. Some of those who have argued for an ``informed consent'' approach
to safety for the emerging Personal Space Flight industry make an
analogy to the ``barnstorming'' days of aviation when a formal
structure for regulating safety did not yet exist but the aviation
market continued to grow dramatically. It doesn't seem from your
testimony that you agree with that analogy. Is that true? If you don't
agree, why not?
A1. We are not among those who have argued that informed consent is
adequate. Two things need to happen for a healthy, sustainable private
space flight industry.
1. A level of safety at least as good as the early airliners.
2. Some form of FAA approval for the flight vehicle's safety
as regards the paying passengers, not just the uninvolved
public.
We believe the industry might be stillborn after the first fatal
accident if these two items are not provided.
Questions submitted by Representative Jim Costa
Q1. One of the goals of previous hypersonic R&D programs such as the
National Aerospace Plane was to cut travel times between widely
separated locations such as the west coast of the United States and
Asia. Would a commercial version of the sub-orbital spaceship you have
developed be able to contribute to that goal? Why or why not?
A1. Sub-orbital rockets, flying parabolic missions will work nicely for
flying people outside the atmosphere. However, they are limited to 300
or 400-mile trips. Air breathing, high altitude propulsion or space
planes that skip along the atmosphere's extremities would be needed for
travel between widely separated locations.
Attachment
Regulation of Manned Sub-orbital Space Systems
for Research and Commercial Operations
A summary prepared by Burt Rutan, Scaled Composites
Safety Requirements for the Private Spaceline Industry
New generic solutions for safety as compared to
historic Government manned space operations will be mandatory
Cannot run a Spaceline without a huge reduction of
current risk
Safety Goals: Airline experience as a model
Risk statistics, fatal risk per flight
First 44 years of manned space flight = one
per 62 flights
First airliners (1927 & 1928) = one per 5,500
flights
Early airliners (1934 to 1936) = one per
31,000 flights
Current airliners = one per two to five
million flights
Modern military fighters = one mishap per
33,000 flights
Logical goal:
Better than the first airliners
< one percent of the historic government
space flight risk
Different Systems Need Different Regulation Methods
The AST Process
To show that the consequence of failure,
i.e., the expectation of casualty (Ec) for the non-
involved public (NIP) is low.
Deals with systems that are historically
dangerous.
The AVR (now AVS) Process
To show that the probability of failure (Pf)
is low.
Assures safety of crew and passengers.
Deals with systems that need to be reliable.
The risk method approach by AST
Risk is product of failure probability and
consequence.
NIP risk with dangerous systems is assured
only by selection of flight area.
Flight crew risk with dangerous systems can
be addressed only by flight termination staging.
However, since Pf cannot be calculated for
immature systems, AST has no acceptable process for new
systems that have to be safe enough for commercial
passenger service.
AST Methods for Booster-like systems
Computer-flown or remote operation
Automation that requires backup via flight-
termination systems
Ground-launched
Safety-critical rocket propulsion
Un-piloted stages dropped
High-scatter landing
AVR Methods for Aircraft-like systems
Human Piloted flight
Expendable-like flight-termination systems
are not appropriate
Runway takeoff
Rocket propulsion not safety critical
No ``bombing'' of hardware that presents risk
to NIP
Horizontal aircraft-like runway recovery
If the safety approach is based on failure
consequence it should be regulated by AST.
If the safety approach is based on failure
probability it should be regulated by AVR or by staff
experienced in aircraft safety assurance.
If safety is based on both consequence and vehicle
reliability, then consequence should be calculated by AST, but
Pf must be accessed by those with aircraft safety regulation
experience.
Experimental Research Testing of Airplane-like Systems
Cannot be addressed by enforcing standards or
guidelines--the important need is to allow innovation; to seek
safety breakthroughs without regulatory hurdles. Regulators
must not be expected to appreciate this need during a research
test environment.
Pf cannot be calculated, thus historic data must be a
guide for approval of an adequate test area to meet Ec intent
for NIP.
Environmental requirements, like for aircraft are not
needed, but they can be tolerated, with costs not the full
burden of the developer.
The AVR waiver method for all regulations is
mandatory. The developer must be able to argue the equivalent
safety justification for non-compliance to any regulation. This
is critical, especially for an immature industry with
indeterminate technical issues.
The AST launch licensing process is not acceptable
due to its costs, its hindrance of innovation and its negative
effect on safety policy. The AVR-EAC (Experimental
Airworthiness Certificate) method works and must be
implemented. The system is based on respect for a developer's
safety record and the expectation that he will follow the
license rules.
Certification, or Licensing Spacecraft for Commercial Sub-orbital
Passenger Operations
The manufacturer and the operator cannot accept a
scenario in which the FAA has no role in approving the safety
of crews or passengers. His responsibility to do adequate
testing to assure passenger safety must have acceptance by the
FAA. Otherwise he has no unbiased defense at trial following an
accident.
Part 23 & 25 Certification are based on defining
conformity. Then, by test and analysis showing adequate margins
for the conformed vehicle. Subsequently the holder of the
certificate can then produce and operate unlimited numbers of
vehicles that conform. The main costs of certification are the
issues related to conformity, not the specific tests to show
margins.
Any ethical manufacturer or operator must test to
show margins, even in the absence of any government regulation.
However, initially the manufacturer and operator will
build and operate only a very small number of vehicles, thus
making the detailed conformity process debilitating. Also, the
intensity of the process would interfere with the need to solve
new technical problems and to maintain a ``question, never
defend'' posture while system technical status is not mature.
Our proposal: an applicant seeking approval to fly
passengers will be required to define the tests needed to show
adequate margins for his design and define the required systems
safety analysis. He must then obtain acceptance of the test
plan by FAA regulators and later get acceptance that the tests
were satisfactorily completed. The process will be design
specific and repeated for each flight article.
Conformity of the design, the tools, the systems or
the manufacturing process will not be required.
A manufacturer can select the conformity process as
an option if he desires to avoid the individual tests of each
production article.
Conformity may be mandatory after the industry
matures (the aircraft certification process).
Lessons from the Regulatory Process During the SpaceShipOne (SS1)
Research Flight Tests
The Tier1 test program involved 88 flights, 17 for
the SS1 and 71 for the White Knight. 83 of those flights were
licensed via an AVR-AIR-200 Experimental Airworthiness
Certificate. Those flights were done under the authority of the
EAC and directed via the information in its Operating
Limitations list. The EAC was in effect for the duration of the
program, July 2002 to October 2004.
Five flights of SS1 were flown under the additional
authority of an AST Launch License. License was in effect from
March 2004 to October 2004.
The 83 flights flown under the EAC involved the
highest risk, both to the pilots and the NIP: first flights of
unproven vehicles and nearly all envelope expansion, including
first supersonic flight of SS1 to max-q.
The EAC flights were regulated similar to the 1,800
research flights conducted by Scaled on 36 aircraft types over
a 30-year period: we were expected to fly within the Ops Limits
list, and were trusted to do so. The program allowed the
innovation always present in aircraft research, and did not
interfere with our `question, never defend' safety policy.
Development of the new safety innovations were done
under the EAC: the new type hybrid rocket motor, the air launch
and the `care-free re-entry' feathered concept.
The EAC process provided an efficient environment for
exploratory testing and continued the historic research
aircraft record of safety for the NIP.
The AST Launch License process enforced on the
remaining five flights of SS1 was a very different regulatory
environment. We were assured streamlining from the
certifications needed for commercial operations approvals but
were kept in the dark on specifics. The process involved a 15
month, three party Ec analysis that failed to arrive at an
adequate calculation for Pf, thus rendering the Ec
determination to be useless. The process was misguided and
inappropriate, at times resembling a type certification effort
and left the applicant without the basic information needed to
determine status. The regulators requested Ec analysis, then
ignored those results without informing the applicant or
allowing him to defend, to revise or to resubmit the data. The
regulators refused to reveal the government's analysis method
for Ec calculation. The `shell game' continued for the majority
of the program, resulting in a severe distraction to key test
personnel as well as high costs and a disregard for our safety
policy. The environment also precluded innovation.
The Launch License process, as applied to the
aircraft research test environment resulted in increased risk
for our flight crews, the very people that bear the true risk
in experimental flight tests.
The AST office had no waiver policy, and answered our
requests by a written denial from the Administrator without
giving the applicant the opportunity to debate or negotiate the
technical merits or to get an opinion from the EAC's regulatory
staff.
Conclusions
An applicant for approval to fly research flight
tests of piloted, aircraft-like systems must have a defined
process, one that allows him to plan his program staffing and
financial needs. It is not acceptable to impose undefined,
inappropriate forced oversight. The specific EAC process has
served the industry well for decades and should be used and
enforced by regulators familiar with research aircraft testing.
The Ec process, developed for protection of
population from the dangers of ground-launched, expendable
rocket boosters, is not workable for application to piloted,
aircraft-like systems during research tests and must be
replaced by the AVR method of having test-experienced
regulators select an appropriate flight test area for research
tests. The Ec process might be justifiable for commercial
operations, but it must be regulated by those experienced with
commercial aircraft operations.
Regarding licenses to conduct commercial flights that
carry revenue passengers, it is not acceptable for FAA to
ignore the approval or acceptance of the vehicle's ability to
safely fly people. Regulation must be done by experienced
(aircraft experienced) staff.
The acceptance of the system's probable safety can be
done via a vehicle-specific test requirement process for
structures and safety analysis for systems, rather than the
more expensive Type Certification process that includes full
conformity assurance. These processes cannot be defined in
advance by specification of standards or by design guidelines,
since every new system will have unique features. The testing
details and systems safety analysis process must be specific to
the vehicle and its intended operation. This process does not
have to be significantly more expensive than that which would
be done by any ethical manufacturer in the absence of
government regulation.
Answers to Post-Hearing Questions
Responses by Will Whitehorn, President, Virgin Galactic
Questions submitted by Representative Sheila Jackson Lee
Q1. It has long been my belief and contention that space exploration
is something that should not be limited. This principle has generally
applied to space exploration by nations, but today we face the prospect
of space tourism where individuals would be the ones who get to explore
space. I feel strongly that this opportunity should not just go to the
rich, but also to others who have a passion for space exploration;
especially students should at least have a chance at this. I believe in
the long run this will be good for business and good for the science of
space exploration because it will only increase the general public's
interest in space. Does Virgin Galactic have any plans to provide the
chance to explore space to even a select few individuals who may not
have the means to pay for such a flight?
A1. Representative Jackson Lee, let me assure you that Virgin Galactic
shares your concern that financial barriers alone should not limit
commercial space travel to only the most financially able. Virgin
Galactic is committed to making seats available on our spacecraft each
year for individuals who cannot afford to pay the commercial price for
this adventure of a lifetime. Our plans to accomplish this shared goal
are in the early stages. I will provide more details to you and the
Subcommittee as they crystallize. At this point, we are in discussions
with the National Space Society to receive its input. Internally, we
also are exploring opportunities to make tickets available every year
for other charitable purposes. As our plans solidify, we will keep you
and the Subcommittee advised.
Q2. You come from a background in the airline industry. As you look
forward to operating commercial passenger-carrying spaceships, what
aspects of your operations do you think will be similar to those of
airlines, and what will be different? In particular, how will the
safety and maintenance practices you plan to follow in your Virgin
Galactic operation differ from those you follow in Virgin Atlantic?
A2. Lest there be any confusion, commercial operations for Virgin
Galactic and Virgin Atlantic will differ markedly in many significant
respects. Running a commercial space business is dramatically different
than running a scheduled commercial airline. Differences aside, the
most important common thread Virgin Galactic and Virgin Atlantic share
is Virgin's unwavering commitment to safety. With respect to the
airlines Virgin operates around the world and the passenger rail
service we operate in the United Kingdom, the Virgin brand has become
synonymous with safety. We have never lost a passenger. This fact is
our proudest accomplishment. Similarly, safety will be Virgin
Galactic's North Star.
Virgin Galactic will differ from Virgin Atlantic in a number of
significant operational respects. For instance, it will not operate
point-to-point service and it will not be subject to the Federal
Aviation Administration's (FAA) customary regulatory structure for
commercial carriers. These differences aside, the safety procedures we
envision will bear some similarities to the lessons we have learned
from our safe and successful airline ventures. For example, Virgin
Galactic's pilots will be expected to develop a pre-flight safety check
protocol similar to that used by our commercial airline pilots.
Similarly, we intend to have maintenance practices and spacecraft check
procedures similar to those jointly used by operators and manufacturers
in the commercial airline industry. One key area of difference will be
Virgin Galactic's pre-flight focus on the health, safety and security
of our passengers. Working closely with the FAA's Office of Commercial
Space Transportation, we plan to develop pre-flight guidelines that
will be rigorously followed.
Answers to Post-Hearing Questions
Responses by John W. Vinter, Chairman, International Space Brokers
Questions submitted by Representative Mark Udall
Q1. In the past, we have heard the concern expressed that new
commercial space ventures would not be able to find insurance because
of the risk presented to insurers from potential launch failures. Is
that still a concern?
A1. Underwriters are not unduly concerned about launch failures. They
recognize that launch failures are part of the unique circumstances
with respect to space ventures. What underwriters are concerned about
is untried and unproven technology. Underwriters generally are quite
willing to insure developed technology. Thus, in most cases,
underwriters wait to see one or two successful launches before
committing underwriting capacity for subsequent launches. The thesis
being that a new launch vehicle or other untried technology should
first be proven to work before seeking insurance. That said,
occasionally the market will sometimes insure new technology but at a
very much higher price.
Q2. How will the insurance market for commercial passenger-carrying
spaceships differ from that for expendable launch vehicles that launch
unmanned satellites?
A2. The market will consider the reliability for commercial passenger-
carrying spaceships in much the same way that it does for expendable
launch vehicles that launch unmanned satellites. The space market is
primarily a property market. It will rate each spaceship and/or launch
vehicle on its own merits. Thus, today whether we are discussing Space
Shuttles, the Atlas or the Delta, the market will rate the launch
system on its own merits. In due course as passenger-carrying
spaceships prove themselves to be working, the likelihood is that
eventually passenger-carrying spaceships will be treated very much like
airline planes and their passengers are treated today.
Q3. As you look at the emerging commercial human space flight industry
being described by Mr. Rutan and Mr. Whitehorn, how important will
demonstrating adequate safety margins in advance of flight operations
be if they want to get insurance? Are there any regulatory approaches
to safety that would be more likely to make it easier to get insurance?
Less likely?
A3. As stated in the answer to Question 1 above, the market would want
to see successful demonstration of the vehicles carrying humans before
making significant commitment to such vehicles. I should point out from
the beginning that the market has insured humans on the Space Shuttle
and indeed tourists on the Russian Soyez vehicle. A regulatory regime
much like the FAA regime for aviation will most likely be rewarded by
the market and the demonstration of successful flights will be the
determining factor in these circumstances.
Q4. In your testimony you mentioned the potential impact of current
export control policies on the U.S. commercial space industry.
Please elaborate on the nature of your concern with
the present situation.
What would you do to fix the problem?
A4. The concern with the current ITAR arrangement is that non-U.S.
satellite operators are favoring European suppliers of the satellites
over U.S. suppliers in large measure because of the complication of the
ITAR regime. The current ITAR regime limits the amount of information
available to non-U.S. owners. Thus, all other factors being equal, a
non-U.S. customer will buy a European satellite because it is much
simpler to buy such satellite. I am aware of a number of instances
where this happens to be true.
Please note I am talking of standard commercial communication
satellites. With respect to launch vehicles and Earth observation
satellites and new high technology equipment, I do not suggest any
change to the current regime. In particular, launch vehicles and Earth
observation satellites can be deemed weapons and as such, should be
controlled to the maximum extent possible. With respect to standard
communication satellites, however, I should point out that such
satellites are in production in Europe without restrictions and nothing
is gained from strictly controlling technical information with respect
thereto.
With respect to these satellites, consideration should be given to
removing such satellites from the Munitions List. If there is a
particular technology, by all means this technology should be
protected. If the concern is of a particular country such as China,
then it should be specified as such. The above comments are made as an
observer of the current situation and it does not have an insurance
connotation.
With respect to the non-U.S. underwriter community (approximately
2/3 of the market is overseas), I suggest an annual license be adopted
for each underwriter for all projects. A license is now issued to each
underwriter for each launch to be insured or each satellite on-orbit,
no matter how similar the satellites are. While the current government
employees are very efficient in processing licenses, it seems a waste
of time. A streamlined approach would be simpler.
Answers to Post-Hearing Questions
Responses by Wolfgang H. Demisch, President, Demisch Associates, LLC
Questions submitted by Chairman Ken Calvert
Q1. The Federal Government invests large sums of money in space and
aeronautics research and development. From an economic perspective
which has a greater return on investment for the U.S. economy,
investments in space or investments in aeronautics? Are there specific
areas within either space or aeronautics that have a particularly high
return on investment?
A1. The economic contribution of the aeronautics sector substantially
exceeds that of the space segment, both in terms of direct sales as
well as when factoring in the associated business activity. Moreover,
because a substantial fraction of the federal space funding is
committed to support manned space operations, an investment whose goals
are primarily social rather than economic, the returns on space
spending are further diluted. Historically, the Congress has not
wavered in its steadfast support of advanced technology development,
with aerospace a leading beneficiary. Experience has shown that
advanced technology brings enormous social benefit through the new
industries and jobs that it makes possible. Hence at the national level
it has been the Congress's choice to support ambitious new technology
and leave marginal improvements to industry. To achieve a better return
on its aerospace investment, the Congress may find it useful to take a
wider perspective on the challenges facing the aeronautics and space
communities. In civil aeronautics, the aerodynamics and structures
technology is mature.
One limiting factor is the need for manual control of each
individual flight. This is both economically burdensome, (crew costs,
along with fuel and capital, are one of the three largest elements in
the air carriers direct operating cost) and a safety/reliability issue,
particularly in general aviation. A more aggressive push to achieve
automatic fight, with increased safety standards from what we now
accept, should be a national goal Deployment would presumably start
with the cargo carriers, but should spread very quickly as it would
transform airline economics and greatly improve the utility of general
aviation. Achieving this capability requires at the very least seamless
cooperation between the FAA and NASA, plus superior software
integration, but the payoff is very large.
Feasibility is clearly demonstrated by the growing numbers of
military UAVs now routinely deployed in the U.S. and abroad.
In the military aerospace segment, strategists are seeking much
higher speed flight vehicles and very long endurance systems. Much
better materials and more efficient power sources are prerequisites for
these efforts. unfortunately, although NASA has much experience in
these issues, the NASA effort in these areas is small and shrinking.
The success of the X-43 program last year is not being pursued, even
though the return on investment from operational hypersonics for the
country appears compelling.
The returns on space investments are often smaller simply because
of time. The most promising commercial space businesses are
communications and Earth observation both substantially regulated and
hence subject to long delays before new technology can be brought to
market. For instance, the Ka band communications now beginning to be
offered were demonstrated in the 70s by NASA's experimental and very
successful ATS III satellite. To rebuild the Nation's technology
reserves and to restore NASA to its proper role as a technology
generator for the national economy, in my opinion, it would be
beneficial to encourage really challenging goals, objectives that
cannot be met with off the shelf systems. one such goal could be deep
space, to send probes out towards nearby stars, recognizing that such a
mission would last perhaps centuries. The task would set new standards
for advanced propulsion, ultra light structures, sensors and power
systems, plus extreme reliability. Another goal might be comprehensive
and ongoing multi-spectral Earth observation. To properly assess the
implications of the geyser of environmental, economic and military data
such a system would generate represents the data management challenge
of the century, but the rewards are proportionate.
Answers to Post-Hearing Questions
Responses by Molly K. Macauley, Senior Fellow and Director, Academic
Programs, Resources for the Future
Questions submitted by Chairman Ken Calvert
Q1. The Federal Government invests large sums of money in space and
aeronautics research and development. From an economic perspective
which has a greater return on investment for the U.S. economy,
investments in space or investments in aeronautics?
A1. I appreciate the importance of this question, as the answer should
guide budgetary allocations for both of these fields. However, I have
not and do not know of any economic analyses comparing these
investments on an apples-to-apples basis (that is, with comparable
methods, time periods, and other modeling criteria).
Q2. Are there specific areas within either space or aeronautics that
have a particularly high return on investment for the overall economy?
A2. Although I am not aware of studies that can provide an answer, the
field of economics usually argues that government investment, as
differentiated from private sector investment, has the higher return
and the less potential to crowd out private investment when made on
innovation that is generic, hence hard for private investors to capture
a return.
Questions submitted by Representative Mark Udall
Q1. What future markets do you see for the commercial remote sensing
industry?
A1. I see at least three markets. One market is providing services to
operational civil and military government agencies, as implemented by
funding awards to the commercial industry from the National Geospatial
Intelligence Agency. On the civil side, the Federal Government has yet
to provide a ``one-stop'' agency through which government can arrange
for imagery purchases to support activities of the EPA, DOI, Dept. of
Agriculture, Dept. of Energy, and other agencies. Yet the market seems
to be there. For instance, while not a federal agency data purchase,
the State of Hawaii has recently arranged to buy Quickbird imagery from
DigitalGlobe to map rainy terrain in Kauai County. It is key that the
imagery had to be of adequate resolution to meet the requirements of
FEMA's Digital Flood Insurance Rate Map (see Space News, 6 June 2005,
p. 13). It is also worth noting that the products that the commercial
remote sensing industry provides are derivatives of sensor
instrumentation and spacecraft bus designs pioneered by NASA's four
decades' of remote sensing science and technology.
A second market is sales to commercial markets--agribusiness, real
estate, utilities, etc. Here, the commercial markets are still coming
up to speed in terms of having the expertise and technology in place
for making use of imagery. At the same time, the commercial imagery
world needs to better develop and market its products for the
commercial sector. The commercial imagery world still is quite
provincial in producing products with limited general appeal.
A third market yet to be tapped is that of providing imagery and
other data from space assets for the purpose of monitoring compliance
with domestic environmental regulation and international environmental
agreements.
Q2. What do you consider to be the biggest obstacles to growth and
sustainability of the commercial remote sensing industry?
A2. I see the biggest obstacles to be:
-- failure to market more consumer-oriented, easy to use and
understand products. This calls for better annotation of
imagery as well as a Microsoft-approach to product design.
-- failure to think outside the government procurement
mechanisms to exercise more mainstream, consumer-oriented
pricing and marketing
-- a possible concern about innovation and R&D, typically the
role of NASA. Cutbacks in the Earth science budget may not
ensure that our remote sensing industry remains state-of-the-
art.
Appendix 2:
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Additional Material for the Record
Statement of Herbert F. Satterlee, III
Chairman and Chief Executive Officer, DigitalGlobe, Inc.
Mr. Chairman, Mr. Ranking Member, and Members of the Subcommittee,
I would like to thank you for the opportunity to discuss the future
market for commercial space and specifically as it pertains to the
remote sensing and satellite imagery industry. I am the Chairman and
Chief Executive Officer of DigitalGlobe, a commercial remote sensing
and satellite imagery and information company based in Longmont,
Colorado.
There are three commercial imagery companies currently operating in
the United States, each with one satellite on orbit. Launched in 2001,
DigitalGlobe's QuickBird satellite offers the world's highest
resolution imagery commercially available at 61 centimeter resolution.
Thornton, Colorado-based Space Imaging and Dulles, VA-based ORBIMAGE
operate the IKONOS and OrbView3 satellites respectively, both at
approximately one meter resolution. All three companies provide
unclassified, high resolution satellite imagery to government and
commercial customers worldwide for a variety of market applications
such as defense and intelligence, homeland security, agriculture,
forestry, oil and gas, environmental assessment, disaster planning,
mitigation and recovery, flood insurance mapping, transportation and
more.
Despite the vast range of potential markets for commercial
satellite imagery, the industry has been slower to develop than
originally anticipated. Still, the industry sees steady commercial
growth with each fiscal quarter, and increased interest and demand from
government and commercial customers. Strong U.S. Government anchor-
tenant commitments have helped this industry maintain momentum as it
develops commercial markets, and a continued commitment from the U.S.
Government will be necessary until the full commercial market develops.
These markets will not fully develop until we address the expensive and
risky nature of the commercial space business which inhibits the
realization of the industry's full potential. The cost of access to
space has been a tremendous barrier to entry, and will continue to
stifle industry's progress in making this business profitable. In order
for the U.S. commercial satellite imagery industry to remain
competitive with foreign and other domestic competitors and achieve its
maximum potential, the cost of access to space needs to be
significantly reduced.
Access to Space is a Competitive Discriminator
DigitalGlobe, clearly the leading commercial satellite imagery
company in the remote sensing industry, has been in operation since
2001 with the launch of our QuickBird satellite. DigitalGlobe won the
industry's largest-ever U.S. Government contract in 2003, and just
recently signed the biggest, most prominent commercial contract the
industry has ever seen. However, in recognizing these accomplishments
and celebrating our successes, we must not forget the long, tumultuous
road we've traveled and the challenges that lie ahead for DigitalGlobe
and the entire industry.
Because of the tremendous cost associated with launching and
operating commercial satellite imaging systems, it is an extremely
risky business. One of the most significant challenges in successfully
getting three companies to orbit has been the cost of access to space
(including the consequent insurance premiums). All three of the
commercial U.S. operators struggled to enter the market, each having
experienced at least one launch or on-orbit failure. Approximately
fifty percent of the cost to put DigitalGlobe's QuickBird system in
orbit was related to launch and insurance costs, totaling tens of
millions of dollars. Access to space in the past has been one of
biggest barriers to building a successful commercial industry, and it
will continue to be a major discriminator in the future.
Although the commercial satellite imagery industry has several
benefits over its market rival, the aerial photography industry, it
nevertheless experiences a major competitive disadvantage. The cost to
develop and fly a commercial aerial photography sensor in an airplane
is far less expensive than the cost to build and launch a commercial
imaging satellite; yet, to stay viable, commercial satellite imagery
providers must offer pricing competitive to that of the aerial
photography companies.
Not only does our industry see competition from domestic
competitors, but also from foreign satellite imagery providers. Foreign
competitors are gaining a foothold in the global marketplace, and
subsidization from foreign governments is a significant contributing
factor. The U.S. companies make up the only truly commercial industry,
having launched three satellites, all financed through private capital.
Foreign providers enjoy partial or full subsidization from their
governments, enabling them to more quickly realize a profit.
As the Commission on the Future of the Unites States Aerospace
Industry identified, ``the cost to orbit is an essential ingredient for
progress.'' The cost of access to space needs to be significantly
reduced in order for the U.S. commercial satellite imaging industry to
remain competitive with foreign and other domestic competitors.
The U.S. Government-Industry Partnership: A Mutual Reliance
In part because of the high cost for access to space, the
commercial satellite imagery operators have had to rely on significant
U.S. Government contracts to sustain the industry while we grow the
commercial markets. Long-term U.S. Government commitments such as the
National Geospatial-Intelligence Agency's ClearView and NextView
contracts have been key factors in allowing the industry to attract the
private investment necessary to serve fixture commercial markets.
Industry seeks a similar level of commitment from the U.S. civil
government agencies to help grow our businesses and markets.
While the U.S. Government has made a significant investment in the
industry, it receives tremendous value in return. As President Bush's
2003 Commercial Remote Sensing Space Policy recognized, a robust
commercial satellite imagery sector will ``advance and protect U.S.
national security and foreign policy interests,'' ``foster economic
growth, contribute to environmental stewardship, and enable scientific
and technological excellence.'' To this end, the President directed
U.S. Government agencies to ``rely to the maximum practical extent on
U.S. commercial remote sensing space capabilities'' and ``develop a
long-term, sustainable relationship between the United States
Government and the U.S. commercial remote sensing space industry.'' By
entering into long-term partnerships with industry and increasing its
reliance on commercial satellite imagery, the U.S. Government is able
to realize increased cost savings, streamline requirements among
agencies and reduce duplication of efforts.
U.S. Government reliance on commercial satellite imagery drives
further demand for and consumption of the technology. For example, as
the industry entered into the marketplace several years ago, the
initial demand from the defense and intelligence community was slow to
materialize. However, the reliance on commercial imagery during
military operations in Afghanistan and, even more so, in Iraq
demonstrated that commercial products and services were of even more
value than many had previously imagined. The ability to share
unclassified commercial imagery with coalition troops and allies was
invaluable, and the capacity of the industry to provide imagery to
troops on the ground sometimes within a few hours of collection was
remarkable. Because the use of commercial satellite imagery in these
two campaigns was proven to be highly successful, the defense and
intelligence communities have accelerated the convergence of commercial
technology with national imagery architectures, and will increasingly
rely on commercial sources to meet their mapping and intelligence
needs.
Another area where commercial satellite imagery was a significant
factor in helping to complete a vital mission for the U.S. Government
and others throughout the world was during the Southeast Asian tsunami
crisis in December of 2004. Within hours of the event, commercial
satellite imagery of the devastated areas flowed via Internet
connection to U.S. and global emergency relief organizations.
DigitalGlobe offered newly collected imagery along with archived data
of the same geographic areas from our ImageLibrary, enabling relief
workers to assess the magnitude of the damage, navigate the altered
landscape, determine where infrastructure and medical facilities
previously existed or needed to be constructed, and decide on their
next courses of action.
Data stored in the ImageLibrary is not only valuable for before-
and-after assessments such as this, but also for assistance in pre-
event emergency planning. For example, archived, yet current satellite
imagery could be extremely useful in emergency response planning for
future tsunamis, earthquakes, hurricanes, forest fires, or other
disasters. Satellite imagery together with digital geographic
information systems (GIS) containing features such as key
infrastructures like roads, airports and utilities, and key
installations like hospitals, shelters, fire departments, and schools
can be helpful in planning evacuation and emergency scenarios.
Cultivating Commercial Markets
The global exposure that the tsunami and military operations
provided the commercial satellite imagery industry has not only been
instrumental in increasing the U.S. Government reliance on the
technology, but also in cultivating new commercial markets. For
example, the news media's use of commercial satellite imagery during
Operation Iraqi Freedom captured the attention of the oil and gas
industry, which is now investigating the use of the technology for
vulnerability assessment, infrastructure security and exploration
purposes. And, State and local governments have focused more of their
attention on satellite technology for emergency planning and relief,
and homeland security purposes. Agriculture is another example of a
market with huge growth potential for our industry. By utilizing new
and archived commercial satellite imagery to assess crop and soil
conditions and detect change, growers can make faster, better informed
and more accurate crop management decisions, resulting in greater
productivity and higher revenues. The insurance industry can benefit
from utilizing high resolution commercial satellite imagery and
elevation data to determine flood, fire or other hazardous zones. Even
professional consumers such as realtors can use commercial satellite
imagery and other GIS technology to map and identify potentially
lucrative land development opportunities by being able to analyze
traffic patterns, population growth, census data, and key
infrastructure placement. And in addition to commercial businesses,
satellite imagery has even reached the individual consumer market with
the recent deal made between DigitalGlobe and the Internet search
engine Google to provide Internet surfers with current satellite
imagery of almost any researched location on Earth. The list of
potential commercial and consumer markets for commercial satellite
imagery goes on and on: forestry, environmental assessments,
transportation, port and airport security, economic development, etc.
Conclusion
After experiencing many bumps along the road, the U.S. commercial
satellite imagery industry is experiencing steady growth and success.
However, the industry has had to put its future into the hands of the
U.S. Government. Without long-term U.S. Government commitments, U.S.
companies' plans to begin their next generation systems might still
only be ideas and briefing charts. Instead, the C1earView and NextView
programs have turned those charts into hardware for both DigitalGlobe
and ORBIMAGE by allowing our companies to attract the hundreds of
millions of dollars in private investment required to build and launch
our future generation systems.
Having more commercial satellite imaging assets in space multiplies
the benefit for both the U.S. Government and the vast array of
potential commercial customers. However, with launch and insurance
costs remaining extraordinarily excessive, government budgets facing
deficiencies, and foreign and domestic competition looming, the U.S.
commercial imagery industry still faces significant challenges. More
must be done to lower the cost of accessing space, or the commercial
satellite imagery industry will be challenged to realize its full
potential and provide the innovative solutions on which its government
and commercial customers have begun to rely.
Biography for Herbert F. Satterlee, III
Chairman and Chief Executive Officer,
DigitalGlobe
Mr. Satterlee joined the DigitalGlobe team in 1998, bringing more
than 25 years of experience in business and finance management for
space, defense and remote sensing programs. In the face of two
satellite failures prior to the successful launch of QuickBird in 2001,
Satterlee rebuilt DigitalGlobe by refocusing the management team,
boosting employee morale and confidence, leading the company out of
near bankruptcy and securing the financing necessary to move forward
with plans to build and launch QuickBird. Under Satterlee's direction,
DigitalGlobe became fully operational and began serving customers in
2002. Also under Satterlee's leadership, DigitalGlobe was granted a
quarter-meter imaging license by the U.S. Government, and was awarded
the NextView contract by the National Geospatial-Intelligence Agency in
2003. Satterlee will help lead DigitalGlobe and the commercial remote
sensing industry into the next generation of imaging with the
construction and launch of the WorldView system no later than 2006.
Satterlee is member of board of directors for USGIF, on the advisory
committee for National Satellite Land Remote Sensing Data Archive, The
National Oceanic and Atmospheric Administration's (NOAA's) Advisory
Committee on Commercial Remote Sensing (ACCRES), and a member of MAPPS
and ASPRS.
Satterlee previously served as CEO of RESOURCE21 LLC, a Denver-
based remote sensing information products company. There, Satterlee led
the development of aircraft-derived imagery information products for
the agriculture industry. Prior to that, Satterlee spent 19 years
working for Boeing Company, where he held several senior management
positions. He received a Bachelor's degree in business administration,
with a specialization in finance, from Washington State University, and
an executive Master's of business administration degree from the
University of Washington.
About DigitalGlobe
DigitalGlobe is an Earth imagery and information company located in
Longmont, Colorado. With superior image resolution and unmatched
customer service, DigitalGlobe makes it easier than ever to use spatial
information to improve decisions in markets such as agriculture, civil
government, environment, infrastructure, exploration, visualization-
simulation, and intelligence.
DigitalGlobe offers the world's highest resolution commercial
satellite imagery, the largest image size, and the greatest on-board
storage capacity of any satellite imagery provider. In addition, the
company's comprehensive ImageLibrary houses the most up-to-date images
available. DigitalGlobe established market leadership with the 2001
launch of its QuickBird satellite, and will continue its legacy with
the construction and launch of WorldView--the industry's next-
generation commercial satellite imaging system.
DigitalGlobe's comprehensive geo-information product store--at
digitalglobe.com--delivers data for many types of project requirements.
Through this online store, customers can access a wide variety of
imagery and derivative information products, including 61-centimeter
panchromatic and 2.4-meter multi-spectral imagery--the highest
resolution satellite imagery commercially available.
In addition to technical superiority, DigitalGlobe distinguishes
itself through its commitment to quality, fairness and customer
satisfaction, and prides itself on being the most reliable and
responsive provider of satellite imagery and information products for
commercial and government applications.
DigitalGlobe's Basic Imagery products are designed for users with
advanced image processing capabilities. DigitalGlobe supplies QuickBird
camera model information with each Basic Imagery product, permitting
users to perform sophisticated photogrammetric processing such as
orthorectification and 3D feature extraction. Basic Imagery is the
least processed image product of the DigitalGlobe product suite.
Standard Imagery products are designed for users with knowledge of
remote sensing applications and image processing tools and require data
of modest absolute geometric accuracy and/or large area coverage. Each
Standard Image is radiometrically calibrated, corrected for sensor and
platform-induced distortions, and mapped to a cartographic projection.
Orthorectified Imagery products are designed for users who require
imagery products that are GIS-ready or have a high degree of absolute
geometric accuracy for analytical applications. Each Orthorectified
Image is radiometrically calibrated, corrected for sensor, platform-
induced, geometric and topographic distortions, and mapped to a user-
specified cartographic projection. Additionally, customers may choose
to have these imagery products digitally mosaiced, edge-matched, and
color-balanced to create seamless wide-area coverage. The panchromatic,
natural color, and color infrared versions of Orthorectified Imagery
are well suited for visual analysis and as backdrops for GIS and
mapping applications, while the multi-spectral version is best used for
image classification and analysis.
In addition to imagery products, DigitalGlobe provides product
solutions for environment/natural resources, civil government,
visualization-simulation, infrastructure, agriculture and other
markets. The products include cloud-free mosaics, vegetation maps,
bundled and merged products. DigitalGlobe also partners with industry
leaders to provide value-added imagery and information products.
Prepared Statement of Peter H. Diamandis,
President and CEO, X Prize Foundation
Chairman Calvert and Members of the Committee, thank you for
permitting me to submit this testimony on market development for
personal space flight.
Today I wish to brief you on three subjects pertinent to your
discovery of the marketplace for space and our ability to meet the
needs of that market in the near future: First, the X-Prize
Competition; second, the critical need to support an emerging new crop
of space entrepreneurs; and third, the need to embrace an increased
level of risk in our exploration of space.
The X-Prize Competition:
The Power of a `Prize' to drive the market
There is a large and vibrant marketplace of individuals willing to
pay for the opportunity to fly into space. Recent surveys consistently
indicate that more than 60 percent of the U.S. public would welcome the
opportunity to take such a trip. The Futron organization quantifies
this public space flight market at more than $1 billion per year, over
the next 20 years.
On October 4, 2004, Burt Rutan and the Mojave Aerospace team,
supported by private financing from Mr. Paul Allen, won the ANSARI X-
Prize Competition--proving to the world that sub-orbital flight was
possible to develop in the private sector, safely, and at low cost.
But, this is one vehicle. I support the notion that the market will not
be served until there are multiple vehicles offering a diversity of
competing spaceships serving this market.
The X-Prize Competition
In 1995, I proposed an idea that would spur the industry into
motion to develop these myriad spacecraft. We funded the $10 million X-
Prize and it was offered to the first private team to privately build a
ship and fly three adults to 100 kilometers altitude, twice within a
two-week period. The prize was purposefully funded to support the
development of a spaceship capable of meeting the current market
demand.
We announced the X-Prize Competition in May 1996 in St. Louis,
under the Arch with then NASA Administrator Dan Goldin and 20
astronauts, business leaders and visionaries. Twenty-seven teams from
seven nations signed up to compete over the next eight years. During
this time, 150 individuals deposited funds to reserve a ride on the
winning vehicle. The market for private space flight was born.
The result of the X-Prize competition was a miraculous rise in the
public's demand for space flight, coupled with the private sector
stepping forward with private funding to develop the vehicles.
Additionally, the prize maximized investment. For the promise of a $10
million prize, more than $50 million was spent by the competing teams
in research, development, and testing. Dozens of real spacecraft were
actually built and tested. Compare this to a $10 million investment
from a government procurement program, which historically has resulted
in one or two paper designs.
This is Darwinian evolution applied to spaceships. Rather than
paper competition with selection boards, the winner was determined by
the ignition of engines and flight of humans into space. Best of all,
we didn't pay a single dollar until the results were achieved.
The bottom line is that prizes work!
NASA's Centennial Challenges
I'm also very proud of the critical role that the success of the X-
Prize Competition played in inspiring NASA to create the newly
announced Centennial Challenges. These annual NASA prizes will help
encourage out-of-the-box thinking that is sorely needed in our risk-
adverse space community. While the annual budget for NASA's Centennial
Challenges is only $25 million today, I imagine and ask for the
Committee's support for a future where 2.5 percent of the NASA budget,
some $400 million, would be offered each year. And, what would be truly
exciting is to see NASA combine its efforts in research with the
development efforts of the private sector--resulting in a two-tiered
system of space flight.
Entrepreneurs can solve the problems that large bureaucracies
cannot. Prizes offer NASA and the U.S. Government both fixed-cost
science and fixed-cost engineering. More importantly, prizes offer NASA
the passion and dedication of the entrepreneurial mind that cannot be
purchased at any price.
I encourage the Committee to fully embrace and support the use of
prizes for NASA's future Orbital, Moon and Mars initiatives.
Public Support drives the economic engine
As a result of the ANSARI X-Prize Competition, the front pages of
Forbes, Investors Business Daily, Wall Street Journal, Wired, The
Washington Post and the New York Times began to report on a new breed
of space entrepreneurs. Companies representing the X-Prize teams, XCOR,
SpaceX, Zero Gravity Corporation and Space Adventures captured both
public attention and investor interest. For our space community, these
companies were the early versions of Apple, Microsoft and Netscape.
These companies embodied the entrepreneurial ``can-do'' spirit of
America. When the X-Prize was won, it was the number two story of the
year in 2004, headlining more than 300 newspapers and media outlets
worldwide.
Most of the new space companies, including Zero Gravity Corporation
which I founded, are focused on one specific market: Personal Space
Flight. Many of us believe that it is the only commercial market that
makes near-term sense. Call it space travel or barnstorming, the fact
is that the public will pay for a chance to fly into space. This is a
mass market that can yield a profit while developing breakthroughs in
launch operations. These two areas are the very essence of what is most
needed to develop a hearty industry.
The reason that space flight is so expensive today is simple--there
just isn't enough of it. The commercial launch market for satellites is
pathetically small, only 15-25 per year. The number of human space
launches is even smaller: four Space Shuttle flights and four Soyuz
flights.
What we need is not dozens, but thousands of space flights per
year. Flights that teach us about launch operations--how to refuel, re-
tool and re-launch a fleet of reusable vehicles.
I recognize that the vehicles resulting from the X-Prize are only
sub-orbital ships, only one-thirtieth the size of today's orbital
ships, but the lessons we will learn from these vehicles are critical.
We will learn about operations, an area in which we are sorely lacking.
Everyone knows that the reason the Space Shuttle costs so much to
operate is not the fuel, but its dependence on a standing army of
10,000-plus professionals. We have people, watching people watching
people in order to increase safety margins.
In stark contrast, the reason that a crew of six can turn around a
Boeing 737 for its next flight in 20 minutes is the operational
robustness achieved through millions of flights conducted during the
first 50 years of aviation. Flights that began with 10-minute hops
across farmers' fields grew over time to transatlantic journeys. Our
space program has in essence skipped the learning stages of these 10-
minute hops and went straight to orbital shots. We need to practice and
learn, but we cannot achieve the flight rates and experience base we
need with the Space Shuttle or the Crew Exploration Vehicle or any
other large government program.
The next generation of X-Prize vehicles will soon be competing in
the X-Prize Cup--an annual competition for rocket-powered aircraft and
future spacecraft. The X-Prize Cup is a partnership established between
the X-Prize Foundation and the State of New Mexico under the vision of
Governor Bill Richardson--specifically to support the new generation of
space entrepreneurs. During X-Prize Cup week, there will be an
Education Day with thousands of students learning about space, rocket
demonstrations and eventually races, and an exposition of space-related
technologies. In 2005, we will ``Countdown to the X-Prize Cup'' at the
Las Cruces International Airport from October 6-9.
I urge the Committee to join our efforts to recognize the need to
support the creation of personal space flight, if for no other reason
than to enable a high flight-rate and teach us about low-cost, safe and
frequent operations of rocket powered vehicles. NASA and the DOD should
embrace this new generation of sub-orbital vehicles to learn all they
can. Fly them frequently. Learn. Support America's space entrepreneurs.
ACCEPTING RISK:
Finally I'd like to address the issue of risk. In contrast to
individuals who speak about reducing risk, I want to speak in favor of
taking more risk.
There is no question that the ANSARI X-Prize Competition involved
risk--so does going to the moon or Mars or opening any portion of the
space frontier. BUT, this is a risk worth taking!
As Americans, many of us forget the debt we owe to early explorers.
Tens of thousands of people risked their lives to open the `new world'
and the American West. Thousands lost their lives crossing the ocean
and then the plains--but we are here today because of their courage.
Space is a frontier and crossing new frontiers is inherently risky!
As explorers and as Americans, we must have the right to take risks
that we believe are worthwhile and significant. We owe it to ourselves
and to future generations. It is also critical that we take risk to
develop technology. It is critical that we allow for failure. Without
risk and without failure, we cannot initiate and realize the very
breakthroughs we so desperately need.
A breakthrough, by definition, is something that was considered a
``crazy idea'' the day before it became a breakthrough. If it wasn't
considered a crazy idea, then it really wasn't a breakthrough, but an
incremental improvement. Remember those immortal words, ``Failure is
not an option''. . .if we live and work in an environment where we
cannot fail, than breakthroughs may not be an option either.
In summary, I urge the Committee to support those efforts that will
allow us to realize our dreams of space exploration. Support prizes as
the most efficient mean to foster and enable breakthroughs in
technology and embrace risk. Help the American people understand that
space exploration is risky--but a risk worth taking.
Let's let space explorers be heroes once again.