[an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] Report to Congress
on the
Office of Space Commercialization [an error occurred while processing this directive]

FEBRUARY 2001

This report is submitted to Congress as directed by the Commercial Space Transportation Competitiveness Act of 2000 (P.L. 106-405). Section 4(b) of the Act states that "Not later than 90 days after the date of the enactment of this Act, the Secretary of Commerce shall transmit to the Congress a report on the Office of Space Commercialization detailing the activities of the Office, the materials produced by the Office, the extent to which the Office has fulfilled the functions established for it by the Congress, and the extent to which the Office has participated in interagency efforts."

I. INTRODUCTION

The Technology Administration Act of 1998 (P.L. 105-309), signed by the President on October 31, 1998, authorized the establishment of the Office of Space Commercialization ("the Office") to be "the principal unit for the coordination of space-related issues, programs, and initiatives within the Department of Commerce." To this end, the Office works closely with other bureaus within the Department of Commerce ("the Department") with separate space-related responsibilities and authorities, including the National Oceanic and Atmospheric Administration (NOAA), International Trade Administration (ITA), Bureau of Export Administration (BXA), and National Telecommunications and Information Administration (NTIA).

The Office has been in existence since 1988 when Secretary William Verity issued Department Organization Order 15-19 (12/2/1988), creating an "Office of Space Commerce" within the Office of the Secretary. The Office was later moved into the Office of the Under Secretary for Technology under Department Organization Order 10-17 (12/2/1996), issued by Secretary Mickey Kantor. The Departmental language outlining the functions of the Office is largely the same as that codified by Congress in 1998, except the official name of the unit has now changed to "Office of Space Commercialization."

For the purposes of this report, only those activities taking place after the October 1998 congressional authorization of the Office are described.

II. ACTIVITIES AND FUNCTIONS OF THE OFFICE

The goal of the Office of Space Commercialization is to foster an economic and policy environment that ensures the growth and international competitiveness of the U.S. commercial space industry. To this end, the Office conducts activities in three primary areas -- policy development, market analysis, and outreach/education.

Since October 1998, the Office of Space Commercialization has concentrated its efforts on a select group of commercial space industry sectors, including satellite navigation, satellite imaging, and space transportation. The Office has also been involved to a lesser extent in other space-related areas such as satellite communications and emerging space business frontiers.

A. Satellite Navigation
The premiere system for satellite-based navigation, positioning, and timing throughout the world is the Global Positioning System (GPS), a constellation of U.S. government spacecraft in medium earth orbit. Originally developed for use by the military, GPS is now critical to a wide range of civilian activities and represents a fundamental component of the global information infrastructure. Under the 1996 Presidential GPS policy directive, the system is managed as a national asset by the Interagency GPS Executive Board (IGEB), whose membership includes senior officials from all civilian and military departments with an interest in GPS. The Commerce Department serves on the IGEB as a key representative of the commercial, scientific, and governmental GPS user communities.

The Office of Space Commercialization has been involved with satellite navigation, GPS, and the IGEB for many years. Recently, its activities in this area have increased significantly as the Commerce Department's role on the IGEB has expanded. These activities generally fall into four critical and interdependent issue areas: (1) GPS management; (2) GPS modernization; (3) international discussions to promote GPS as a global standard; and (4) protection of the GPS radio spectrum.

1. GPS Management
The proper management of the Global Positioning System as a global information utility requires significant coordination across many agencies of the Federal Government in order to balance diverse interests such as national security, public safety, international leadership, and economic competitiveness. This coordination occurs at the top level through the IGEB principals, including the Deputy Under Secretary of Commerce for Technology, who is directly supported by the Office of Space Commercialization. However, in addition to the high-level policy makers, there exists an entire decision making infrastructure to flesh out details at the working level and prepare matters for review or action by the IGEB. This complete GPS management infrastructure was not present and functional at the inception of the IGEB. It has only been implemented within the past two years, with major assistance from the Office of Space Commercialization.

In late 1998, the IGEB, based on its charter, identified the need for a permanent Executive Secretariat to support its activities on a day-to-day basis. The Office of Space Commercialization participated in the working group that planned its implementation, including functions, organization, personnel, and funding. Recognizing the opportunity to take a leadership role in IGEB matters, the Office proposed housing the Executive Secretariat at the Commerce building in Washington, D.C. With the support of Deputy Secretary Robert Mallett and Under Secretary Cheryl Shavers, the Office presented the proposal to the IGEB and received approval in May 1999. In cooperation with the National Oceanic and Atmospheric Administration (NOAA), a Department of Commerce agency, the Office spent the next few months committing office space, personnel, equipment, and other resources to the establishment of the IGEB Executive Secretariat. By early 2000, the new office was fully operational, and by May 2000, it had become widely recognized as a central component of the GPS management structure. At the present time, the IGEB Executive Secretariat is headed by a detailee from the Office of Space Commercialization, who was approved by the IGEB co-chairs, and includes another Office detailee as a professional staff member.

In addition to the Executive Secretariat, the Office of Space Commercialization has played an important role in the activities of the IGEB Senior Steering Group, established in 2000, and the three ad hoc working groups that were formed under it to settle GPS matters of a technical nature. The Office has also worked actively with the Department of Transportation's Extended Positioning and Navigation Executive Committee, the State Department's GPS International Working Group, the Department of Defense's GPS Independent Review Team, and the GPS Interagency Notification Team. In each of these fora, the role of the Office has been to promote solutions and ideas that benefit the commercial and civilian users of GPS. In developing Commerce positions on major issues, the Office has convened many coordinating meetings both within the Department and with industry representatives such as the U.S. GPS Industry Council.

Also within the area of GPS management, the Office of Space Commercialization has played an important role in ensuring the continued funding of GPS and its future improvements. During 1998-1999, the Office and NOAA co-chaired an interagency working group to develop strategies for funding GPS and GPS modernization as a national priority rather than as programs specific to the Departments of Defense or Transportation. These strategies fed into White House decisions on the FY 2000 budget request. Later, as the requested funds faced challenges in Congress, the Office participated in coordinated outreach efforts to educate the legislative branch on the importance of GPS to the general public. During the FY 2001 budget cycle, the Office continued to provide outreach briefings for congressional staff and led in organizing a major GPS industry trade fair on Capitol Hill to demonstrate the tangible benefits of GPS to Members of Congress.

2. GPS Modernization
On May 1, 2000, the President announced his decision to immediately deactivate the Selective Availability (SA) feature of the Global Positioning System, thereby producing a tenfold increase in civilian GPS accuracy. This action represented a major victory for the civilian community, which had demanded removal of SA for many years. The Office of Space Commercialization had fought for this on their behalf during the formulation of the U.S. GPS policy in 1996, and it continued to actively advocate this position as Secretary of Defense William Cohen prepared his recommendation to the President on whether to discontinue SA in 2000. In the final days leading up to the President's decision, the Office worked to get Secretary Cohen's report endorsed by Commerce Secretary William Daley and the IGEB. The Office then prepared major press statements and remarks issued on May 1 by Secretary Daley, Under Secretary for Technology Cheryl Shavers, and NOAA Under Secretary James Baker, hailing the end of Selective Availability.

The SA deactivation represented only the first step in a long-term effort to improve the overall capabilities of the Global Positioning System. This so-called GPS modernization program was initiated by the IGEB and announced by Vice President Al Gore in March 1998. Since that time, the Office of Space Commercialization has been working closely with the other IGEB agencies to ensure that the capabilities of the future system are designed in a way that maximizes the benefit to civilian and commercial users. For example, through intensive participation in numerous interagency working groups, the Office helped the IGEB select the "L2" (1227 MHz) and "L5" (1176 MHz) radio bands as the locations for two new civilian signals. The specific design characteristics of these new signals should enable a nationwide navigation capability at the sub-meter level, benefiting many commercial interests. To support this decision, the Office prepared economic analyses justifying the investment, co-chaired a working group on funding strategies for modernization, and collected inputs from industry on the need for GPS upgrades.

In December 1998, the Office helped organize a major roundtable discussion involving Deputy Secretary Mallett and U.S. industry executives from a wide range of business sectors. The summary report from the meeting was used to support not only the continuation of the modernization process but also an acceleration in the overall implementation schedule. It played a key role in the eventual decision by the IGEB to retrofit up to 12 GPS "Block IIR" satellites with new civilian capabilities, thereby ensuring their availability by 2003 instead of much later.

During 1999-2000, as the GPS modernization program got under way, the IGEB's role expanded to include not only planning for the future but also overseeing the implementation of the initial modernization activities. The Office of Space Commercialization has played an active part in both of these functions, participating in newly established civil-military teams for program oversight as well as in the requirements process for the recently announced "GPS III" program to field the next generation of GPS satellites.

3. International Discussions
Pursuant to the 1996 GPS policy, the U.S. government has sought to negotiate agreements with Japan, the European Union, and Russia to promote the use of GPS as a worldwide standard. As a member of the U.S. negotiating team, the Office of Space Commercialization has played a significant role in these international discussions by representing the interests of commercial GPS users and businesses.

A joint statement on GPS cooperation was signed by President Clinton and Japanese Prime Minister Keizou Obuchi in September 1998. The Office of Space Commercialization contributed greatly to the development of the document, which establishes a framework for cooperation in areas such as free trade, spectrum protection, and seamless navigation systems. Under this framework, the Office chairs a bilateral working group on commercial and scientific GPS cooperation. At the group's first meeting in October 1999, the two sides shared a great deal of useful information on emerging applications of GPS and on growth rates for international GPS markets. The Office will participate in a U.S.-Japan plenary meeting to review the status of cooperation in February 2001.

The Office has played an integral part in the U.S. discussions with Europe since they began in 1996. These talks have focused on convincing the European Union to embrace GPS as a free, reliable, global utility. Within the past two years, the Office has participated in numerous rounds of talks, delivering key presentations on European opportunities in the GPS market and on commercial issues in general. The Office contributed to the development and coordination of U.S. negotiation strategies and a proposed international agreement that would ensure protection of GPS and GPS users should Europe decide to build its own, independent satellite navigation system. The draft text of this agreement was delivered to the European Commission in October 2000 and the United States is currently awaiting their official response.

In addition to the bilateral consultations with the European Commission, the Office has participated in a number of international outreach missions led by the State Department to discuss GPS with individual member states of the European Union. Over the last two years, the Office has traveled with a U.S. delegation to the United Kingdom, Germany, Belgium, Denmark, Sweden, Finland, Spain, and Portugal in order to educate local representatives from government and industry on the importance of GPS to their own economies.

Since 1998, there has only been one formal meeting between the U.S. and Russia on the subject of satellite navigation. The Office of Space Commercialization participated in this meeting in May 2000, presenting general information about the U.S. and international GPS markets and discussing areas where bilateral cooperation with Russia might improve commercial business for both countries.

4. GPS Spectrum Protection
The Office of Space Commercialization has participated in numerous ongoing activities related to the protection of the current and future GPS radio spectrum from potential interference. Such protection is critical to the proper operation of the system and has been a top priority for the IGEB and its members for several years. On the international front, this means participation in the International Telecommunications Union (ITU) process which culminates in a World Radiocommunication Conference (WRC) every two to three years. The Office of Space Commercialization worked closely with NTIA, the State Department, and other IGEB members to help stave off threats to existing GPS allocations at the most recent WRC in May 2000 (WRC-2000). The U.S. achieved success at WRC-2000, not only preserving but increasing the amount of spectrum allocated for GPS. The Office is now working with the appropriate IGEB working groups to prepare for WRC-2003, where additional threats to the viability of GPS are looming.

Within the United States, there is also a need to prevent interference with GPS, and the Office of Space Commercialization has played an active role in pursuing this goal through the spectrum allocation processes established by the Federal Communications Commission (FCC). Most significantly, in 2000, the Office worked closely with NTIA to prepare and file comments from the IGEB regarding the FCC's proposed rulemaking on ultrawide band (UWB) devices. This matter has yet to be resolved.

In late 1999, the Office was asked to assist the Defense Department in preparing a report to Congress outlining a national strategy for GPS spectrum protection, both internationally and domestically. To support this effort, the Office collected formal inputs from industry to be incorporated into the final report document.

B. Satellite Imaging
The world's first commercial satellite capable of imaging the earth at one-meter resolution was declared operational in January 2000. The spacecraft, Ikonos, is owned and operated by a U.S. firm and licensed by the Department of Commerce (1). The occasion marked the fulfillment of a vision set out by the President in a 1994 policy directive (Presidential Decision Directive-23) on commercial satellite imaging, or "remote sensing." The vision placed the United States in a leadership position within the emerging commercial remote sensing industry, which provides high-tech information services applicable to real estate, insurance, agriculture, oil exploration, and many other enterprises. The Commerce Department played a leading role in the establishment of this policy and, through NOAA and the Office of Space Commercialization, continues to work hard to ensure its proper implementation.

In 1998, the Office contributed to the development of a White House guidance memorandum elaborating how to implement certain aspects of the President's remote sensing policy. Among other things, the document called for the formation of a Remote Sensing Interagency Working Group (RSIWG) to streamline the review of applications for the export of advanced satellite imaging systems, and to advise the State Department on whether and how to establish a government-to-government agreement as a prerequisite to a particular transaction. Since the group was established, it has reviewed numerous applications and engaged foreign governments in discussions and negotiations concerning U.S. satellite imaging policy.

Along with NOAA and the International Trade Administration (ITA), the Office has been an active participant in the group as a representative of the interests of the commercial satellite imaging community. The Office has supported Deputy Secretary Mallett during deputies meetings on remote sensing policy, which are convened whenever interagency conflicts cannot be resolved at the RSIWG level. The Office has also served on the Licensing Subgroup of the RSIWG, which examines applications for export licenses for space-based technologies at a technical level.

Through the RSIWG, the Office of Space Commercialization participated in several international consultations on satellite imaging policy during 1998. Such discussions, led by the State and Defense Departments, took place with a number of supplier countries, including Israel, Japan, and Italy. The purpose was to inform them of recent developments in U.S. remote sensing policy, understand their commercial and governmental policies in this area, and protect U.S. economic, national security and foreign policy interests. The Office's role at these talks was to represent the interests of the commercial remote sensing community, as communicated during industry roundtables and other meetings.

These international discussions continued throughout 1999 as the United States conducted bilateral discussions with Canada, Italy, Japan, and Spain concerning the possible sale of U.S. remote sensing systems, components, and technology, to those countries. To support these ongoing talks, the Office hosted a meeting with representatives from U.S. industry to update them on the progress of the government-to-government discussions and to hear their views on issues to be raised and addressed. To date, these talks have resulted in the completion and signature of international agreements with Japan and Canada, enabling the export of U.S. components to those countries for use in government satellite imaging systems. These exports are expected to range in the hundreds of millions of dollars. A key provision within the agreements, included at the suggestion of the Office, is that any national system developed and operated for reconnaissance purposes cannot be also used for commercial gain.

In addition to participating on the traveling delegations, the Office served as an advocate for U.S. industry interests during high-level meetings within the Federal Government on U.S. remote sensing policy in relation to Australia, Canada, Israel, Italy, Japan, Spain, and Taiwan.

Outside the RSIWG context, the Office of Space Commercialization has also represented the Commerce Department on the interagency Imagery Policy and Security Committee (IPSCOM). The purpose of this committee is to resolve questions on the declassification of U.S. national satellite imagery and its further dissemination. The Office participates in order to ensure that U.S. commercial satellite imagery providers are not disadvantaged when remote sensing data collected by the Federal Government is made publicly available.

In 1999, the Office supported NOAA in issuing the first U.S. licenses for commercial hyperspectral satellite imaging systems (2). The Office also participated in a series of government-to-government discussions with Canada regarding their RADARSAT-2 Synthetic Aperture Radar (SAR) program. The licensing jurisdiction for this satellite became complicated when the prime contractor, a Canadian firm, became a wholly owned subsidiary of a U.S. company. As a result of these consultations, Canada and the United States signed an agreement supporting the licensing of remote sensing technology exports and commercial operations.

In December 2000, NOAA issued the first licenses to allow commercial firms to image the earth at resolutions as high as one-half meter. This change represented a major step forward for U.S. industry, one which the Commerce Department and the Office of Space Commercialization had been pressing for over the past several years. The move should ensure continued U.S. leadership in the increasingly competitive satellite imaging marketplace.

C. Space Transportation
Access to space is fundamental to the success of any commercial space enterprise. For this reason, the Office of Space Commercialization has always been interested and engaged in U.S. government efforts intended to improve the affordability, reliability, and availability of space transportation services. During the reporting period, the Office participated in a number of activities relating to space transportation, including: (1) review of U.S. launch range management; (2) monitoring and negotiation of launch trade agreements; (3) industry outreach and site visits; and (4) consideration of financial incentives for investment in new launch systems.

1. Launch Range Management
In early 1999, the White House directed the Departments of Defense, Commerce, and Transportation, as well as the Central Intelligence Agency and NASA, to conduct a comprehensive review of U.S. policies affecting launch base and range activities. The goal was to examine the appropriate division of responsibilities between the government and commercial sectors, develop a national strategy for the future management and use of U.S. space launch bases and ranges, and recommend changes to law, policy, or budgets that would be required to effect such changes. An interagency working group was established, including representatives from the Office of Space Commercialization, with oversight from a Senior Executive Steering Group (SESG) including the Deputy Secretary of Commerce. As part of the working group, the Office participated in a series of high-level meetings with the Air Force and site visits to the nation's commercial spaceports in Florida, California, and Virginia. The Office's role was to collect and review inputs from U.S. industry and ensure that their concerns were addressed in the final interagency recommendations. In November 1999, the Office helped to organize and host a roundtable meeting with industry to hear specific problems with the national launch ranges that were not being addressed by the Air Force.

The working group produced a report that was reviewed by the SESG and forwarded to the President in February 2000. In June, the White House called for the immediate implementation of the recommendations, two of which directly involve the Department of Commerce. The Office has been working closely with ITA and FAA to fulfill both of the requirements. The first was to propose alternative management structures to give commercial customers a stronger voice and improved operational flexibility within the launch range management structure. To this end, the Office solicited ideas from U.S. industry and, with these in mind, helped establish a new commercial requirements collection process to provide formal civil inputs into the Air Force acquisition process. The second relevant recommendation was to pursue use of non-federal funding sources for the continued maintenance and modernization of the U.S. launch ranges. The Office is involved in an ongoing interagency effort to identify and implement the legal mechanisms necessary to enable the Air Force to accept external funding for this purpose.

2. Launch Trade Agreements
Since 1988, the Office of the U.S. Trade Representative (USTR) has engaged in trade negotiations with the spacefaring nations with economies in transition -- namely, China, Russia, and Ukraine -- to ensure a level playing field in the international market for space transportation services. The Office of Space Commercialization participated in the negotiation, monitoring, and renewal of commercial space launch trade agreements with each of these nations in the early to mid-1990s. During the past two years, the Office and ITA have continued to assist in the interagency efforts to monitor compliance with the disciplines set out in the agreements and to evaluate whether the agreements were accomplishing their intended goal of preventing disruption to the international launch market. The Office participated in meetings of the USTR working group, attended briefings from industry to hear their views, and contributed to the Working Group on Information (WGI), which was established to provide detailed analyses of market developments and their impact on the agreements.

President Clinton's National Space Policy of 1996 called for an eventual end to negotiated trade in the commercial space launch market. Consistent with this policy, the White House announced in the summer of 2000 the termination of the U.S.-Ukraine agreement on trade in commercial launch services. The decision to end the agreement ahead of its original expiration date was based in part on analyses provided by the WGI demonstrating that there was minimal significant downside anticipated as a result of such action. Also in 2000, the Office participated in discussions between USTR and the Russian Space Agency to begin the process of ending negotiated launch trade with Russia. Again, the analysis conducted by the WGI was a contributing factor in the ultimate decision by the White House to allow the U.S.-Russia trade agreement to lapse upon its expiration on December 31, 2000.

3. General Industry Outreach
Over the past two years, the Office has organized and staffed several education and outreach visits to major U.S. space launch facilities by high-ranking Commerce officials, including the Deputy Secretary, the Under Secretary for Technology, and the Deputy Under Secretary for Technology. Facilities visited include the Cape Canaveral Air Force Station and Kennedy Space Center in Florida, the Vandenberg Air Force Base in California, the Kodiak Launch Complex in Alaska, and the mobile Sea Launch platform in California. In addition, the Office arranged for Deputy Secretary Mallett to visit production facilities in California where private companies were developing small, reusable launch vehicles and unmanned aerial vehicles for commercial use. These site visits all took place in addition to the working level visits that occurred under the auspices of the Interagency Review on the Future Management and Use of the U.S. Space Launch Bases and Ranges. The purpose of the senior-level visits was to familiarize Commerce leadership with commercial space transportation issues and to establish direct lines of communication between U.S. companies and the Department of Commerce.

The Office also continued to participate in industry conferences and hold individual meetings with space transportation companies in order to keep abreast of private sector developments and concerns.

4. Financial Investment Incentives
During 1998-1999, the Office participated in efforts led by NASA to identify options for stimulating private sector investment in commercial space transportation systems, including expendable launch vehicles, reusable launch vehicles (large and small), and spaceports. Among the ideas considered as part of this exercise were government-backed loan guarantees, tax breaks, anchor tenancy, and increased federal R&D investments. The Office of Space Commercialization collected inputs from industry on the need for financial investment incentives through roundtable meetings and other venues. The Office also worked with the International Trade Administration and the U.S. Trade Representative's Office to identify possible pitfalls that any of these options might encounter from a free trade perspective.

At approximately the same time, the Senate Commerce Committee also expressed interest in the subject of financial investment incentives for the commercial space transportation industry. The Office participated in a hearing on the topic as well as in subsequent deliberations over Senator John Breaux's legislative proposal to provide government backed loan guarantees for developers of commercial launch systems. The bill is still pending in Congress.

D. Other Areas of Activity
In addition to satellite navigation, satellite imaging, and space transportation, the Office of Space Commercialization has continued to participate in a variety of other space-related activities, including the following:

In the area of administrative activities, it is worth noting that the Office of Space Commercialization has undergone significant changes in personnel since 1998. All but one of the former staff members, including the director, departed the Office within the past two years. In early 2000, a deputy director was installed in the Office and declared interim director. Since that time, the Office has been in a rebuilding mode, moving to a new, larger location and recruiting additional personnel to fill out the staff vacancies. During this transition period, the Office's capabilities have been limited and therefore highly concentrated on a small number of issues. It is anticipated that the Office will be completely rebuilt by early 2001, at which point it will be able to resume full operations across the broad spectrum of commercial space activities.

III. MATERIALS PRODUCED BY THE OFFICE

The majority of the materials produced by the Office of Space Commercialization consists of internal documents such as memoranda used to disseminate information within the Department or to prepare decisions for action by senior leadership. Publicly available material produced by the Office include congressional testimony, public speeches and press statements delivered by the director of the Office and other senior Commerce leaders, educational briefings and presentations delivered by Office staff, and summary reports prepared at the conclusion of government-industry roundtables. In addition, the Office is in the process of updating its web site with educational materials, which will include all of the aforementioned speeches, testimony, briefings, and reports.

The Office is aware of public and congressional interest in having the Commerce Department publish government statistics on the status of the commercial space industry. As mentioned earlier, the Office is currently finalizing a report providing such statistics for public release in early 2001. The report will be distributed to the relevant congressional committees and published electronically on the Office web site as soon as it is available. In addition to the Office's report on space industry statistics, the Department of Commerce also publishes market data through ITA's annual U.S. Industry and Trade Outlook, which contains information on all business sectors including space.

IV. PARTICIPATION IN INTERAGENCY EFFORTS

Commercial space issues generally tend to cross over many lines of jurisdiction and interest within the Federal Government. They touch upon aspects of commerce, national security, international policy, science and technology, public safety, environmental protection, and many other government priorities. As a result, virtually all of the Office activities described in the above sections of this report have involved significant levels of collaboration with other agencies within and outside the Department of Commerce. This interagency cooperation has come in the form of participation in standing working groups, committees, steering groups, executive boards, etc., as well as finite projects requiring collaboration among different agencies. Below is an illustrative list of significant interagency efforts that the Office of Space Commercialization has participated in during the last two years.

Footnotes

1. The licensing authority was given to the Secretary of Commerce as part of the 1992 Land Remote Sensing Policy Act (P.L. 102-555). This authority was delegated to NOAA.

2. Hyperspectral imaging sensors provide information in up to hundreds of separate spectral bands in the visible and infrared wavelengths.

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