Today's Opinions, Tomorrow's Reality 

An Astronomical Failure

By David G. Young

WASHINGTON, DC, October 31, 2000 --  

As the first astronauts head toward the new International Space Station to the cheers of space enthusiasts, the viability of space industries is crumbling beneath them. This year has seen a sudden collapse of commercial space ventures, a collapse so dramatic that it makes the widely reported pop of the Internet bubble seem tame by comparison.

The most shocking of these business failures happened in April, when bankrupt Iridium, LLC announced it would soon abandon all of its 88 school-bus-sized satellites and send them out of orbit to burn up in the atmosphere.1 The Motorola-backed company had spent billions of dollars to build a worldwide satellite telephone network that would allow any subscriber to make a phone call from every point on the planet - even the most remote ocean or Antarctic regions. While the system worked beautifully, company salesmen soon found there was little demand for the expensive and bulky phones when cheaper land-based systems were available in the vast majority of markets. As a result, the $5 billion system is about to become the most expensive fireworks show in history.2

Iridium's competitor, GlobalStar Telecommunications Ltd., yesterday reported losses that have grown fivefold since last year, leading financial backer Loral Space Communications Ltd. to abandon financial support and industry analysts to predict that it will eventually suffer the same fate as Iridium.3 A smaller but similar data-only system created by Orbcomm, Inc. has proven equally unable to become profitable, laying off 100 employees in July.4 In September, Orbcomm filed for bankruptcy, putting the future of their 35-satellite constellation in doubt.5

Such failures are horribly demoralizing for the space industry, since telecommunications were supposed to provide the commercial windfall that would replace large-scale defense spending on satellites during the Cold War. During the early 1990s, military-oriented space companies began to reinvent themselves as commercial ventures - a transition that has continued until the massive failures this year.

While telecommunications ventures have been the first line of space businesses to collapse, other commercial space applications teeter on the edge of trouble. One of them, remote imaging, is enjoying a temporary renaissance due to the launch of the first successful commercial spy satellite by Space Imaging Inc., last September. Space Imaging is privately held and therefore not required to release financial results. Even if it is profitable in the short term, it is likely that it will no longer be able to make enough money to stay afloat once competing satellites are launched by Orbital Sciences Corporation and Earthwatch, Inc. Already, the one-meter resolution images offered by Space Imaging are proving to have a limited market, compared with more detailed images obtained by aircraft.6

Direct television broadcasting, another commercial satellite application that has been relatively successful, owes its existence almost exclusively to the failure of cable companies to modernize their systems when they enjoyed monopoly status. Once most households are wired with general-purpose fiber optic lines, direct broadcast systems will be unable to compete with much greater land-based bandwidth. It is only a matter of time.

The space community has become so desperate for commercial applications that proposals have become increasingly bizarre. In September, MirCorp, the international company set up to find commercial applications for the Russian Mir space station, signed an agreement to use the station in a new NBC reality television shown called Destintation Mir.7 NBC would spend $40 million for the show, masterminded by Survivor producer Mark Burnett, which would have multiple contestants compete at Russia's Central Asian cosmonaut training center for the right to go up on the space station.8

The only other real business MirCorp has been able to come up with for the aging space station is to send up Santa Monica resident Dennis Tito as a tourist for $20 million.9 The Russians, however, are having nothing to do with it. After Netherlands-based MirCorp failed to come up with $10 million to pay for refueling the space station a few weeks ago, the Russian government began planning to ditch the giant platform into the atmosphere.10 Tired of MirCorp's incessant pleading for more time to raise money that never comes, the Russian government allocated $27 million last week to send two remote-controlled Progress rockets in February to burn up Mir in a controlled re-entry.11

Ironically, it could be the new International Space Station that seals the nails in Mir's coffin. The United States has repeatedly urged the Russian government to abandon efforts to save Mir - commercial or otherwise - and focus its attention on the new space station. This is regrettable because space tourism is probably one of the few viable space-oriented businesses.

Space tourism is truly different from other commercial space applications because it gets its strength from the same thing that weakens other business models - people's romantic ideals about space. In all applications, the boys and girls who grew up dreaming about the wonders of space travel often end up as investors, executives and workers in space businesses. During the six years I worked in the space industry, I was shocked at the unrealistically naive fantasies engineers and managers had about the future of humans in space. Such ideas detrimentally influence investment and business decisions, and I believe are partially responsible for the space business failures we have seen this year. The wealthier dreamers are probably better suited to become space tourists than space entrepreneurs.

The failure of space businesses means that future ventures will largely be commercially non-viable, and therefore dependent upon governments to prop them up with taxes as in the case of the International Space Station. Robert Zubrin, space exploration enthusiast and author of Entering Space: Creating a Space-Faring Civilization, acknowledges this reality and argues that amazingly expensive government ventures are justified because humans need a driving mission like space in order to prevent the decline of civilization.12

While it may be true that humans need a driving mission, it is unlikely to be space so long as such ventures offer so few practical benefits to humanity. In the near term, a decline in civilization seems much less certain than a decline in space ventures, commercial and government alike.

  1. New York Times, Iridium, Bankrupt, Is Planning a Fiery Ending for Its 88 Satellites, April 11, 2000
  2. Forbes Magazine, High Wireless Act, June 14, 1999
  3. New York Times, Globalstar Loss Widens; Stock, Bonds Fall, October 30, 2000
  4. Space News, Orbcomm Lays Off 100 Employees, Slows Production, July 10, 2000
  5. ORBCOMM Press Release, ORBCOMM Files for Voluntary Chapter 11 Protection as Part of Business Restructuring, September 15, 2000
  6. Space News, 1-meter Imagery Inadequate for Some Commercial Users, April 24, 2000
  7. BBC News, Space Show Set for 'Liftoff', October 26, 2000
  8. Ibid.
  9., Mir to Be Dumped In February, October 23, 2000
  10. Ibid., Mir Funding in Doubt, September 19, 2000
  11. Ibid., Russia Earmarks Funds for Mir, October 26, 2000
  12. Zubrin, Robert, Entering Space: Creating a Space-Faring Civilization, September 1999

Related web column:
The $50 Million Carnival Ride, October 6, 1998