A Major Victory for Space Commercialization

by on October 22, 2008 · 8 comments

Congress has very wisely cancelled the National Reconnaissance Office’s proposed Broad Area Space-Based Imagery Collection (BASIC) satellite system. The proposal to build two new imaging satellites at a cost to taxpayers of $1.7 billion would have represented a major break from what is possibly the U.S. government’s most successful effort to promote space commercialization to date: buying the imagery it needs from commercial providers, who can also sell imagery to other buyers.

Five years ago, the idea that Internet users could pull up a satellite image of just about any location on the planet at a whim would have seemed ludicrous. Yet that’s precisely what websites like Google Maps and Microsoft’s Live Search offer today—for free! Desktop applications like Microsoft’s Virtual Earth and Google Earth offer even more advanced geospatial tools—again, for free. But of course this library of incredibly rich imagery didn’t just “fall out of the sky,” as they say. It was collected by a handful of expensive commercial remote sensing satellites whose construction was made possible by the National Geospatial-Intelligence Agency‘s (Wikipedia) extraordinarily successful “Nextview” program implemented under the Commercial Remote Sensing Policy of 2003.  Rather than having the Federal government build its own satellites—and pay for the entire cost of the satatellites—the NGA very wisely chose to buy imagery from commercial providers in two ~$500 million, 4-year contracts with U.S. satellite imagery companies:  DigitalGlobe in 2003 and OrbImage (now GeoEye) in 2004.  

These long-term purchase agreements essentially made the U.S. Government the “anchor tenant” in a new class of remote sensing satellites, providing the initial funding for both companies to build and operate their satellites. But because the companies sell roughly half of imagery to foreign governments and commercial buyers like Google and Microsoft, these deals have saved U.S taxpayers money for the purchase of imagery for a wide variety of needs, ranging from agricultural monitoring to military intelligence. At the same time, the Nextview contracts have given birth to a vibrant geospatial industry whose immediate benefits should be obvious to anyone who’s ever pulled up a satellite map online and whose macroeconomic impact is potentially enormous. 

So why mess with success?  If the U.S. Government thinks it needs more satellite imagery, why not simply award another long-term purchase agreement to a commercial provider? Besides reducing the burden on the taxpayers, continuing the NextView approach would support the construction of a new generation of commercial satellites like GeoEye-1, which was launched just last month, and DigitalGlobe’s WorldView-1, launched last year.  Rather than rolling back NextView in favor of building its own systems, the U.S. Government should be looking for other space services it can buy on a commercial basis as a way of building industries rather than programs, ranging from sending crew & cargo to the International Space Station to communications and navigation services for NASA’s planned Return to the Moon.

Rather than giving up on the NextView approach in the area where it has already produced spectacular results, the U.S. government should be looking for other areas in which to apply the NextView model by buying space services from commercial providers.

Full disclosure: I was proud to handle FCC matters for GeoEye while practicing law at Latham & Watkins LLP. I currently have no greater personal interest in their success than should any American who wants to see the private sector succeed where the government has failed in opening up the space frontier to all mankind.

  • http://srynas.blogspot.com/ Steve R.

    Brian, the devil is in the details. “These long-term purchase agreements essentially made the U.S. Government the “anchor tenant” in a new class of remote sensing satellites, providing the initial funding for both companies to build and operate their satellites.” (Emphasis added)

    My question, if the Federal government is providing the initial funding for these satellites, is the Government reimbursed for providing these satellites by the companies through their sales? If not, another case of corporate welfare.

  • http://techliberation.com/author/berinszoka/ Berin Szoka

    My explanation wasn't sufficiently clear: When I said that the NextView contracts were “providing the initial cost of the satellites,” I didn't mean that quite so literally. I meant that, by agreeing up front to purchase a certain amount of imagery, the govenrment was providing most of the capital necessary to fund construction of the satellite–but not all. The operators have to sell imagery to foreign governments and commercial providers (consistent with certain limitations in their NOAA licenses), to fund the remaining cost of building and operating the satellite.

  • http://srynas.blogspot.com/ Steve R.

    Thanks for responding. Space commercialization is an important step in moving forward. The process of space commercialization appears to be following the established trend of many other technological advances, those companies that you would expect to be a leader, such a Boeing, in promoting the commercial use of space appear to be reluctant in taking the risk. So it is up to the upstarts to take the plunge, or in this case to launch.

    Government, by providing financial assistance can help jump start these commercial efforts. But when these efforts begin to pay off, the private firms should refund the financial assistance the government provided. (The refunds can be in the form of free use of the satellite(s).) Basically, if our tax dollars are used to assist a private entity, the private entity should feel a degree of responsibility for refunding the taxpayers assistance.

  • http://techliberation.com/author/berinszoka/ Berin Szoka

    If we were talking about government handing simple subsidies to private companies, I would absolutely agree with you that those private companies should pay back the government if they succeed.

    But that's not how NextView works. As far as I understand it, the government isn't just handing out cash to private companies in the hopes of sparking an industry, they're saying, “We will buy X amount of imagery from you over the next four years for Y amount of money. You need to come up with the rest of the cost of your systems on your own. The risk–and reward–is yours. We're just trying to be a good customer by buying what we need upfront.” This approach actually saves the taxpayer money because the government gets to use a portion of the capacity of new satellites for a fraction of what it would cost the government to build new satellites on its own–which is what BASIC would have involved.

  • http://techliberation.com/author/berinszoka/ Berin Szoka

    My explanation wasn't sufficiently clear: When I said that the NextView contracts were “providing the initial cost of the satellites,” I didn't mean that quite so literally. I meant that, by agreeing up front to purchase a certain amount of imagery, the govenrment was providing most of the capital necessary to fund construction of the satellite–but not all. The operators have to sell imagery to foreign governments and commercial providers (consistent with certain limitations in their NOAA licenses), to fund the remaining cost of building and operating the satellite.

  • http://srynas.blogspot.com/ Steve R.

    Thanks for responding. Space commercialization is an important step in moving forward. The process of space commercialization appears to be following the established trend of many other technological advances, those companies that you would expect to be a leader, such a Boeing, in promoting the commercial use of space appear to be reluctant in taking the risk. So it is up to the upstarts to take the plunge, or in this case to launch.

  • http://techliberation.com/author/berinszoka/ Berin Szoka

    If we were talking about government handing simple subsidies to private companies, I would absolutely agree with you that those private companies should pay back the government if they succeed.

    But that's not how NextView works. As far as I understand it, the government isn't just handing out cash to private companies in the hopes of sparking an industry, they're saying, “We will buy X amount of imagery from you over the next four years for Y amount of money. You need to come up with the rest of the cost of your systems on your own. The risk–and reward–is yours. We're just trying to be a good customer by buying what we need upfront.” This approach actually saves the taxpayer money because the government gets to use a portion of the capacity of new satellites for a fraction of what it would cost the government to build new satellites on its own–which is what BASIC would have involved.

  • http://spacefrontier.org/2008/11/29/a-victory-for-private-space/ A Victory for Private Space

    [...] system, which would have directly competed with the companies selling satellite imagery today. Berin Szoka at Tech Liberation Category : [...]

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