The Rocket Science Behind Anti-Trust
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In the early 2000s, Pentagon leadership initiated an outright violation of anti-trust spirit by directing the formation of the United Launch Alliance. Quietly referred to among staffers as a shotgun marriage, the well-intentioned joint venture between the United States’ two largest contractors sent a clear message that the government was in support of a space launch monopoly.
Concerned of an acute industry oversupply and the need for government “help” – the Air Force was under the misguided assumption that it would save money as a customer by forcing a monopoly and realizing efficiencies through economies of scale. Unfortunately, the exact opposite occurred. Launch costs skyrocketed in the non-competitive environment until Elon Musk sought the right for SpaceX to compete for those launches. Fighting in Congress and the courts, he opened the door to new players and competitive norms that have continued to revolutionize the aerospace industry to this day.
Most of us do not follow anti-trust law, yet there are few legal concepts more foundational to a fair, competitive, and healthy space economy – a fact that Musk reminded us of when he challenged ULA. Made famous by the self-proclaimed “trustbuster” himself, President Teddy Roosevelt over a century ago, anti-trust laws have served as a bulwark against anticompetitive practices in the U.S. With the advent of the modern defense industry; however, antitrust measures have been largely ignored – and to the detriment of our national security.
It seems that is about to change. As directed by President Biden, the DoD just announced its published report on the matter. Titled State of Competition within the Defense Industrial Base, the report lays out our current competitive position and what this administration will do to turn the problem around. It underlines the dismal situation we find ourselves in today: a monopolistic industry with virtually no diversity for the government as a customer, which perpetuates the illusion that there is only one solution to its needs.
Of the five overarching themes of the report, two are most relevant to the space sector and must be implemented soon to ensure a healthy space economy. First, the military must encourage new entrants by reducing barriers to entry for the non-primes. Second, it must increase “opportunities for small businesses.” We, the hundreds of space entrepreneurs with tenuous footholds in this sector, could not agree more.
The spartan landscape of choice is a long time in the making, but thanks to anti-trust initiatives and the nascent commercial space industry, a reversal is quite simple. The government’s space acquisition system should promote a new generation of space companies to be direct suppliers through rapid and continuous competition and enable them through careful anti-trust measures.
Open and fair competition can ignite the rest of the space economy, comprised of hundreds of companies, and backed by billions in private investment. We do not need another round of acquisition reforms – just fast and continuous competitions at the commercial world’s pace. Space Force engineers must resist the urge to armchair quarterback the design of these goods and services and instead become smart buyers in a commercial marketplace. If the government buys only what is useful, investors will follow across all segments of the business, including satellites, ground relay systems, data infrastructures, and cyber security.
The return to stricter anti-trust enforcement, already begun with Lockheed’s announced termination of its agreement to acquire Aerojet Rocketdyne after the FTC filed a lawsuit, is a sort of rocket fuel (pardon the pun) for the Space Force. We have learned over the last century of American growth that a market economy is the best engine to improve economic welfare, but the government has an essential responsibility to promote fairness and the common good. Anti-trust enforcement requires knowing and promoting the marketplace with continuous competitions that do not punish unsuccessful bidders with extinction. Real competition within a healthy market is an indication of whether anti-trust regulation is working.
We now know that consolidating two behemoth launch providers into one was the wrong solution because it did not reflect two characteristics unique to the space mission: first, most of the whole space mission is performed by defense contractors and not by military personnel – they largely develop and establish policy or write and oversee contracts. Second, fewer companies lead to declining diversity and innovation, giving the military fewer choices to solve its greatest challenges. By kneecapping small companies and encouraging them to at best remain third and fourth tier suppliers to the traditional defense companies, the current methods devalue new and innovative space companies’ businesses and ultimately make America less competitive.
Recently, space launch costs and satellite constellations have dropped dramatically, as new space companies have been able to challenge legacy incumbents. This is admittedly a great start, but the successes in launch and small satellites paid off because both those companies and their government customers deliberately worked outside the Pentagon’s standard acquisition bureaucracy. A complete embrace of the Executive Order and the report’s recommendations are necessary to fully promote competition in the space acquisition business.
To be successful, the Space Force needs a full pivot to improve and accelerate competitions and safeguard against injurious consolidation. No major acquisition reform is necessary, either. A handful of Pentagon and corporate reactionaries might drag out the old arguments of risk and change, but the rest of us know the opposite to be true: it is too risky not to adapt.
Taking these recommendations to heart and capitalizing on the new space revolution within our own industrial base will help ensure an enduring American space industry. This administration’s renewed anti-trust policies and the success of recent competitive acquisitions will continue to break down barriers to innovation, sending the nation and its Space Force to unimagined heights.
