Roger D. Launius - Historical Analogs for the Stimulation of Space Commerce

The study that follows investigates and analyzes historical episodes in America in which the federal government undertook public-private efforts to complete critical activities valued for their public good. This combination largely resulted from a lack of either sufficient political will to fund them entirely out of the public treasury or insufficient profit motive for private firms to undertake them for purely business reasons. The six case studies include the following: 1) the development of the transcontinental railroad, supported by a unique land-grant approach to subsidy; 2) support for the airline industry through legislation, appropriate regulation, and subsidies to grow a robust air transport capability; 3) the regulatory regime put into place with the rise of the telephone industry and the creation of a government-sponsored monopoly that eventually had to be broken up; 4) government sponsorship of Antarctic scientific stations that evolved into a public-private partnership (PPP) over time; 5) the fostering of a range of public works projects and their success or failure over time; and 6) the establishment of scenic and cultural conservation zones in the United States and ways to balance economic development with preservation.

With the rise of a range of private-sector entrepreneurial firms interested in pursuing space commerce, the process whereby their efforts might be incubated, fostered, and expanded comes to the fore as an important public policy concern in a way never before present in the Space Age. In the United States, and really nowhere else in the world, we are witnessing the convergence of several powerful economic forces. These include the need to restore American capability to reach low-Earth orbit (LEO) for the servicing of the International Space Station (ISS), the rise of a hospitality/tourism/entertainment industry interested in space, the development of expansive remote sensing and other applications in Earth orbit, and the possibilities envisioned for opening commercial space activities in the cislunar region.

Through these case studies, we explore how to apply more effectively already-tested models of government support for commercial activities, as well as the interactions of both the public and private spheres in a new opportunity zone in space. In each case, a summation yields a range of key points. The following paragraphs relate key conclusions.

Transcontinental Railroad: The approach taken by government involvement in 19th-century transcontinental railroad development remains valid to some degree for orbital space operations. The government offered the following six inducements for private development:

Land grants as a means of offering potential future revenue, tied to success in creating the railroad system.

Direct government appropriations to the company involved in the endeavor.

Waivers/modifications to taxes and other regulatory requirements.

Contracts for services once capability was demonstrated.

Government endorsement and backing of corporate bonds/assets.

Indirect support for related but supplemental elements of the railroad transportation system.

In every case, these government initiatives were intended to leverage (and not replace) existing private funding, especially additional industry and venture capital.

To those six, we might add the following:

Private financing supplemented with government loans.

Property and patent rights granted to participating firms.

Broadly construed revenues produced from transportation and other fees.

Regardless, one must ask these critical questions in the context of developing new space transportation structures: How important, in the final analysis, is cheaper access to space? Is it really the key to the future growth of space activities? This seems to be at the cusp of what will go into any stimulation of private space transportation effort.

Commercial Air Transportation: Between 1915 and the 1970s, government officials in the United States undertook a series of critical initiatives designed to create a commercial airline industry in private hands. Washington lawmakers saw the necessity of fostering new technology for the purposes of national security, economic competitiveness, and pride and prestige. That last reason was in no small measure because although Americans had invented the airplane in 1903, by 1914 leadership in the technology had moved to Europethe United States had been left in the dust. Catching up became an important driver for federal investment. Government organizations took a multifaceted approach: military investment, research and development, regulatory efforts aimed at both promoting safety and efficiency and expanding operations, and direct subsidies to commercial entities until the 1960s. Congress could have established a national airline run by civil servants, but instead created a favorable climate for private investment in airlines. For instance, the U.S. Congress established the National Advisory Committee for Aeronautics (NACA) in 1915 to conduct research on flight, and in 1921 New York and New Jersey created a port authority with the power to issue bonds and collect fees for airfields.

In terms of space transportation, there are several lessons to be drawn from the aviation experience. Like the NACA, government agencies could conduct basic research and transfer that knowledge to private firms. In addition, the National Aeronautics and Space Administration (NASA) could transfer its operational responsibility to private carriers. Congress could also create the authoritymodeled on various earlier efforts such as the Overseas Private Investment Corporationto provide loans/insurance to space line firms. Either the U.S. government or states could establish spaceport authorities to manage operations from the ground to orbit; federal agencies could also regulate routes and fares. Many of these efforts are already under way, and we are on the verge of seeing a new age of entrepreneurial space transportation efforts. There are, however, challenges to this approach, not the least of which is that NASA has a critical path with specific milestone deadlines and is hesitant to change this approach; the loans/insurance incentives may not produce services in time; and liability issues are especially burdensome. Nonetheless, major steps have been taken toward this capability in the last decade.