Euroconsult, a leading, international consulting firm specializing in the space and satellite business, recently published a report on worldwide government spending in space. SatCom Frontier reached out to Steve Bochinger, Euroconsult chief operating officer and author of the report, to get a preview of the findings from the study. Our conversation with him appears below.
Last year, governments around the world launched 75 satellites. How does that compare to commercial activity?
SB: The 75 government satellites include only civil and military government satellites of a mass of 50 kg or more, excluding ISS crew or cargo refueling missions, as well as the large number of cubesats launched by academic institutions, primarily technology demonstrators. If we limit commercial activity using the same parameters, in 2016 there were only 23 commercial satellites over 50 kg launched (telecom and earth observation satellites).
However, imposing these restrictions hides the dynamism of activity which is taking place in the commercial satellite sector around cubesats and smallsats.
In your report, you note that civil programs account for a growing proportion of global expenditures at 65%. What’s driving this growth?
SB: A number of main factors explain the growing proportion of civil budgets in global space expenditures. The first is the cyclical nature of military programs: U.S. military space expenditures — accounting for 70% of global space defense spending — declined 45% between 2009 and 2015. We are currently at the lowest point of U.S. military space spending in years, though U.S. spending will upcycle over the next few years.
Another factor explaining the higher percentage level of civil spending in space is the particular spending profiles of leading countries. If we look at the top 15 space powers by budget size, we can see that a number of these have limited or no defense budget at all!
A third, and important, factor relates to the fact that we’re seeing a growing number of countries investing in space. From 30 countries in 2000, we count 70 in 2016 and there will be over 80 by 2026. These countries boost civil space spending worldwide as they focus their initial investments in civil programs, particularly in Earth observation and Satcom.
Looking forward, our analysis projects that defense programs will grow significantly faster than civil: 4% average annual growth for defense versus 2% for civil, which is essentially due to investment cycles in military procurement and growing investments in defense programs worldwide.
The United States remains the world’s largest space spender and yet there’s concern expressed by military officials that we’re not innovating or procuring technologies fast enough to maintain strategic deterrence in space (among other areas). If not spending, to what do you attribute the problem?
SB: The United States is far and away the world’s largest spender on space: $35.9 billion in 2016. It is true that its share of global investments has decreased over time (75% in 2000 v. 58% in 2016) but still, it is over 7 times larger than the next largest (which is China). Even though you have to look at metrics other than raw dollars to measure capabilities, the United States enjoys clear defense space superiority. However, there’s always been concerns about this superiority being challenged: in the past with Russia, and today by China. As elsewhere, there’s also strong lobbying activities to preserve and grow funding levels on programs.
However, as with many other complex issues, it is not merely an issue of throwing money at the problem to solve it. There have been many reports, including from U.S. Government Accountability Office, highlighting the lack of efficiency and recurring cost over-runs in the programs managed by the U.S. government. Over the last years, the trend has been to favor smart spending, rather than always spending more on programs. The commercial resupply service to the space station and commercial crew development programs are good examples on how you can innovate faster by spending less!
How does U.S. space spending differ from other countries?
SB: The U.S. space budget has no equivalent in the world by its size and its domains of investments.
In fact, the United States spends significantly more than all other countries combined! Therefore, the sheer volume of funds available allows the U.S. spending profile to differ from other countries in both breadth and depth. Unlike nearly every other country, the United States is active in every single space application area at the most costly, complex, and technically-demanding levels. These application areas are manned spaceflight, Earth observation, launchers, space science and exploration, satellite communications, satellite navigation, and space security.
Another key difference lies on the profiles of its civil and defense spending. Most of the U.S. civil program is dedicated to manned spaceflight, space science and exploration, which consumes nearly 75% of NASA and NOAA’s budgets combined. This is a real particularity of the United States, as no other country spends an equivalent volume of investment and gives so much priority to these programs in the world. In comparison, other leading countries dedicate most of their civil budget to fund R&D and procurement in satellite applications.
To give you an example, in Europe less than 30% of civil funds are dedicated to science and manned spaceflight, the investment being primarily directed to satellite applications and launchers.
Another key difference distinguishing the United States from the rest is the extent of the efforts the U.S. government undertakes to support and integrate private-sector commercial space to boost and complement its own capabilities. Its recent efforts have been key in the emergence of the “New Space” ecosystem which is now sweeping the entire space industry.
You report that the number of countries investing in space is steadily increasing, from 47 a decade ago to 70 in 2016 and 80 in the coming years. What impact has this market growth had on commercial satellite providers in the past, and what impact do you expect to see in the near future?
SB: The number of countries investing in space is increasing year on year. This phenomenon highlights the fact that governments consider space a valuable investment to support their national socioeconomic, strategic and technological development. It creates additional commercial opportunities for established industry players as these countries do not have manufacturing or launch capabilities. Therefore, acquisitions are combined with technology transfer agreements, as many countries investing in satellite solutions seek economic diversification and the development of a skilled worker base.
Emerging programs in these other countries not only launched more satellites but also launched more complex and expensive ones, whether for communication or observation purposes. Falcon Eye in the UAE or Mexsat in Mexico are good examples.
To give you some striking numbers: the investment from emerging programs averaged $135 million per year from 1996-2005, culminating in $1.44 billion invested in 2015. In addition, the total value of the satellites they should launch is estimated at nearly $12 billion for the next decade (over double that of last decade). This is good news considering the challenging times in other parts of the market.