Remarks on the Trillion Dollar Space Economy

On November 27, 2018, Kevin O’Connell delivered a keynote address at the SpaceCom 2018 conference in Houston, Texas. Below are his remarks as prepared for delivery.

Good morning, ladies and gentlemen. My name is Kevin O’Connell, and I am the Director of the Office of Space Commerce at the Department of Commerce in Washington, D.C. The mission of our office is to “foster the conditions for the economic growth and technological advancement of the U.S. commercial space industry.”

The topic of my talk today is “the $T dollar space economy: how do we get there?” This is not a casual question. It is one that we should think about both critically and objectively.

Today, the global space economy is roughly a $400B economy, of which about 80% is commercial activity. And the United States claims a little less than half of that commercial activity. We used to think about space activities being concentrated in a few key areas, in Florida, in California, and in this great state of Texas, but the fact is that there’s not an area of this great country these days that isn’t deeply affected by the space industry. That’s very exciting, and it is a very promising time for the space industry, as we have the convergence of leadership, finance, and technology that is creating opportunity at unprecedented speed. We used to think about space as an area where some new development was “a decade away,” but in fact these days it might be just two years or two months away.

The topic of the $T space economy isn’t a pure invention; a number of independent assessments envision rapid growth between now and 2040; one estimate from Bank of America places the space economy near almost $3T by that timeframe. This is a topic that we talk about regularly with Secretary Ross, who always asks us to focus on how we can get there. The Secretary is a great promoter of U.S. commercial space activities, both at home and abroad.

What I’d like to do in my short time here this morning is to talk about some of the key elements of how we get to the trillion dollar space economy. Let me start by highlighting the Trump Administration’s intense efforts to encourage the U.S. space industry as a matter of innovation, of commercial and economic benefit, and of course, as a matter of national security. Beginning with the reestablishment of the National Space Council in 2017, the Administration has strongly emphasized space through Space Policy Directive 2, on deregulation of commercial space activities, and Space Policy Directive 3, on space traffic management. My department, the Department of Commerce, plays a key role in the execution of these directives. But Commerce is only one player in the Administration’s “whole of government” approach to space.

What does that mean? It means that we work hard as an interagency to raise and solve issues that impede U.S. industry, among other things. Where we cannot resolve them, they are escalated to higher levels, such as the Cabinet level. Then, every three months or so, we get to report out to Vice President Mike Pence and the National Space Council on our progress. This approach has imparted a speed to bureaucratic movement not often seen in complex areas at the intersection of technology and public policy.

With that in mind, let’s return to our discussion about the $T space economy. What I’d like to do is to talk about some of the key elements, the building blocks, that we will need to realize that vision. Keep in mind, as everyone in this audience knows, nothing is automatic, and there will be speed bumps and failures along the way.

The first element is continuous disruption and innovation, stimulated by a wide variety of technology and business model developments. Where do we see this happening? First, in continued disruption of the “traditional” commercial models in areas like remote sensing, communications, navigation, and even weather. Let’s look at remote sensing as an example: disruption is taking place as verticals beyond defense — mapping, agriculture, and insurance, to name just a few — are expand rapidly. The entire planet is imaged at least once a day. Commercial entities are collecting new phenomena and using new platforms to gain unique information. Disruption also takes place as firms incorporate non-space data for a much richer understanding of our planet, and more precise service offerings with commercial value. And the cycle then continues. Location based services are expanding, and more precise weather predictions — a combination of space and non-space capabilities — are also growing. NOAA’s performance during the recent hurricane season was exceptional, and our ability to predict storm surge allowed for earlier decision-making and actually saving lives.

Second, as these commercial services mature, newer service offerings in satellite servicing, space debris removal, additive manufacturing, and space tourism will emerge. The first two, as we will discuss, will change the economics of space, while the latter two will open up new horizons. Key here will be to create a permissive regulatory framework to let credible businesses take a shot at new space concepts, from across the spectrum of traditional and new space companies. I’m not a fan of the use of the “old space, new space” labels; the fact is that U.S. companies are innovating from across the spectrum of the U.S. space industry, albeit with different business models.

The second element includes a robust finance and insurance environment for the space industry. Both are important surrogates for risk and confidence for the U.S. government. Aside from the billionaire investors, there continues to be strong and growing financial support for the space industry. Bryce Space and Technology assesses over $18B invested in over 180 space start-ups since 2000, most of them since 2012. Further, as some of you have heard me say, early in my tenure at Commerce, I attended a session in NYC with about 50 people ready to invest over $2T in private money in the space sector.

Even so, one of the missing components of space finance are the larger institutions — banks — whose participation will be necessary to achieve our longer-term commercial plans and our ambitions to return to the Moon and Mars. (Kudos to NASA for their extraordinary landing of the InSight spacecraft on Mars yesterday.) Along these lines, the Department will host a space investment summit on December 12 to talk about involving the entire capital spectrum in the commercial space business.

The space insurance business is also changing. As our understanding of the space environment deepens, and our experiences with new space concepts and business models mature, the insurance industry will be a necessary partner to encourage investment. Insurance is shifting from a total loss model to a more sophisticated slate of offerings to address new business models and threats like space debris.

The third element includes improved space situational awareness and space traffic management. As space becomes more congested, including wholly new satellite concepts and platforms ranging from cubesats to mega-constellations, there’s an urgent demand for an improved understanding of the threats to satellites and human spaceflight systems like the ISS. Today, of course, that function is performed by our partners at the Department of Defense, but SPD-3 requires the Department of Commerce to create a civil SSA agency to provide basic SSA data services to commercial firms free of user fees.

This is an another area ripe for disruption. Why? Because an emerging industry segment, or segments, holds new ideas about space sensing, analytics, visualization, and other capabilities designed to greatly improve the accuracy of positioning and other conjunction-related data, and thereby space traffic management.

At Commerce, one of the main ideas that we are working on is an open architecture data repository where companies can showcase new capabilities, either on their own or in tandem with partners. We will build on a continued flow of information from DoD and add new capabilities for new insights.

Greatly improved SSA will not only enhance newer offerings like satellite servicing and space debris removal, but it will change the economics of space entirely. And as I told our European allies a couple of weeks ago, it will continue to involve our allies, even as improved SSA transforms the entire U.S. enterprise. One of the issues that we are discussing is how allied commercial entities might participate in the open architecture data repository.

The fourth element involves talent – more folks like the good folks in this hall today. I’m going to visit Booker T Washington high school tomorrow morning to hear about an exciting space technology program there.

Current estimates place the employment figures for the U.S. space industry at about 200,000 people. My worry is that that figure is undercounted, based on the way we capture the space industry within our economic data. We will be making a report to the National Space Council about that sometime in early 2019. There’s actually a worry that we don’t have enough talent and diverse talent to satisfy the $T space economy. In fact, Space Foundation reports that the sector’s workforce continued to decline in 2016. We have to correct that.

What that means is that, while we certainly need the scarce technical skills, we are also going to need a wide range of technicians, business case developers, analytics specialists, applications developers, teachers, accountants, and others to satisfy the demands of the $T space economy.

Finally, a fifth and related element is improving our understanding and our narratives about the impact of space on earth. To my previous point, I don’t think that we sufficiently capture the economic benefits of space as it affects all of our daily lives. I happened to be speaking at an event recently and I asked a young man what he thought would happen if GPS was no longer available. He pointed to the mapping application on his phone and said “I think I’d probably lose the ability to use this app!” I suggested that we might have far bigger problems at that point!

To conclude, these are at least some of the key elements that will be essential to the $T space economy. But it won’t be automatic. Key innovations in launch and spectrum, and how we manage them, are needed. As will continuing responsible interactions between the U.S. government and industry. International competition is heating up as governments want to both leverage and benefit from the $T space economy, both in its own right and as the backbone of other innovations like telemedicine and rural development.

At the Department of Commerce, consistent with National Space Council direction, we are working to set up a “one stop shop” for industry’s advocacy and regulatory needs. This is a very important area for collaboration, as industry is often aware of government concerns — about safety and security — and knows how to mitigate them within their business models. One of the things we’re working on right now is a “toolkit” for entrepreneurs to leverage various parts of the Department, whether the International Trade Administration, the Commercial Remote Sensing Regulatory Affairs Office, or the grant-making authorities of the Economic Development Administration and the Minority Business Development Agency, both of which have issued space commerce grants in the past year.

Thank you for your efforts to drive toward the $T space economy. I will look forward to your questions.

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