Global space spending falls to Earth

Spending by governments on space programs hit an all-time high last year: $68 billion, or 10 percent higher than in 2008, according to a new report.

And the number of governments investing in space programs, both civilian and defense, also has risen, to 60 from about 40 a decade ago, space sector research firm Euroconsult North America said in the report. 

Worldwide, “2009 has been an excellent year for the space sector,” said Steve Bochinger, Euroconsult managing director. “Governments increased their commitments to space applications, showing that they view space as an efficient investment in a period of tough economic conditions and tight budgets.”

Between 2008 and 2009, spending for civil space programs rose 9 percent to $36 billion while defense space program spendingwas up 12 percent to $32 billion, the report said.

But hold off on packing a bag for Mars. Austere times lie ahead, warned Bochinger, editor of Euroconsult’s “Profiles of Government Space Programs: Analysis of 60 Countries and Agencies” report.

The austerity trend is already apparent from the president’s fiscal 2011 budget. The Defense Department’s space program has an 8 percent decrease. That’s partly a result of completion of satellite programs. Program cancellations also have contributed to budget cuts, Bochinger said. DOD’s $26 billion Transformational Satellite Communications System (TSAT) was put on hold in 2008, then cancelled in 2009. TSAT was to be a high-capacity system for use by DOD, NASA and the intelligence agencies.

“Especially in defense, space is a typical infrastructure business,” Bochinger said. “You buy capacity in a cycle of investment. When your need goes up and you don’t have the infrastructure in place, you buy more capacity and upgrade your space infrastructure. When the asset is in orbit (typically for 15 years) and providing the level of service you need, then you decrease your level of investment.”

Ironically, government support during the current economic crisis also will contribute to the coming drop in investment. “With the economy crisis, many governments raised spending in their space program and made unusually high investments in order to support their economy and the industry,” Bochinger said. “The space sector is viewed as a high tech and innovation sector and therefore is one area that benefited from that investment.”

In the next few years, of necessity governments will have to retreat from current high levels of investment, Bochinger said.

Retreat, but not abandon. President Barack Obama’s budget calls for $5.9 billion over five years for continued funding of the space station and efforts to persuade the private sector to build spacecraft to replace NASA’s shuttle.

But it’s at the cost of NASA’s Constellation program, which was to return Americans to the moon. In December, on the recommendation of an advisory panel headed by former Lockheed Martin Corp. chief Norman Augustine, Obama axed the Constellation program, which had a price tag estimated at $55 billion during the next five years.

Second, space programs generally are far more likely to involve satellites than space ships, telecom and navigation rather than space exploration and defense. Globally, investment is balanced between civil and defense spending for space, but balance exists only as a result of U.S. defense spending: in 2009, an estimated $28.9 billion or 90 percent of the global total.

Most of the investment worldwide goes to “telecom, remote sensing and satellite navigation, which provide direct benefits to the population,” Bochinger said. “Only a few countries can afford to make a significant annual investment in space science, exploration and even launchers.”

Who’s investing

Globally, much of the spending — excepting the lion’s share spent by the United States — comes from other wealthy or fast-growing nations:

• Japan’s $3 billion program focuses on civil and security applications
• Russia’s investment hit $2.8 billion in 2009 after a growth rate of nearly 40 percent annually in five years
• China ($2 billion) and India ($900 million) also are growing fast, the report said.

The number of governments — 26 — that in recent years have begun investing in space programs has trended steadily upward, the report said. Algeria, Egypt, Indonesia, Mexico, Nigeria, Thailand, Venezuela and Vietnam, among others, have initiated domestic programs with an investment usually between $5 million and $50 million and focused on a single type of application, often Earth observation or satellite communications.

Especially in developing countries, earth observation often is the greatest driver for governments to invest in space technology. In contrast to other space applications, Earth observation can be cheap to implement, Bochinger said. “A $20 million expenditure and you get monitoring in many different areas. Plus you get the benefits of any technology transfer derived from implementing the system, and that can be substantial.”

New investor Algeria is a good example. The north African nation “is implementing a satellite program (Alsat) that includes the procurement of the satellite plus the training of its engineers and transfer of some technology with the ultimate objective of building a satellite on its own,” he said.

“This kind of technology transfer not only helps build space programs, as the [recipients] become more capable, it brings up the level of competition,” he said. As the number of trained engineers grows, the benefits expand beyond just providing capacities for government and it creates a new industry and companies that can go out and compete for contracts themselves. 

20-teens, the dark decade

The burgeoning in competition may be a little slow in coming, however. Near term, governments “will have to justify every dollar spent, and space, especially science [and space] exploration, is not usually seen as a top priority compared to employment, education or health care,” Bochinger said.

The commercial investment cycle somewhat lags that of government, so commercial satellite operators now are at a peak of investment to renew and upgrade their satellite fleet; in 2009, they ordered 30 GEO communication satellites, Bochinger said. But that number likely will drop to fewer than 20 per year, he added.

The future of the market looks, if not dim, certainly less than bright for U.S. companies that have counted government as a primary customer. Unlike U.S. companies, “European satellite manufacturers do not benefit from a similar large domestic market,” Bochinger said.

U.S. companies, “like Boeing or Lockheed Martin, have chosen to focus on the national government market rather than competing on the international commercial market,” he said. “But with the perspectives of decreasing government activities in space, U.S. companies will certainly reconsider their strategy and return to compete more aggressively in the commercial market. We’ve seen some signs of it already.”

The market likely will rebound by decade’s end, he said. It’s part of the cycle and it’s what happened in the 1990s.

Between 1990 and 1995, DOD cut its annual funding for space 40 percent . In the late ’90s, it rose again as it likely will in the late 20-teens, he said. “In the second half of the decade, research and development investment will certainly be required again to prepare a new generation of technology.”