New space race gets down to business

By David M. Ewalt and Leah Hoffmann

updated 7:29 p.m. ET Jan. 18, 2006

On July 20, 1969, Neil Armstrong stepped out of a cramped metal spacecraft and onto the moon, creating one of the iconic moments in human history. On Earth, the achievement was broadcast live to billions.

Around the same time, in four obscure laboratories in California and Utah, a much quieter revolution was underway. Researchers commissioned by the U.S. Department of Defense were connecting a handful of computers into the first packet-switched network, which they called the ARPANET, giving birth to a computing system that would lead to the global Internet.

Four decades later, the Internet has changed the way we do business and live our lives, but space still remains inaccessible — the domain of governments and the ultra-rich. There has been little money to be made in space by anyone but huge contractors, such as Lockheed Martin or Boeing, less excitement and no hope of the average Joe getting involved.

But the tide is turning. Flush with dot-com cash — and raised on visions of moonwalks, space shuttles and Captain Kirk — a generation of passionate, tech-savvy entrepreneurs is breathing new life into the space business. Iconoclasts like Virgin Group founder Richard Branson, Amazon.com CEO Jeff Bezos and Google co-founder Larry Page are dedicating not only their dollars but their brainpower.

"All the sudden, you have these new visions for space exploration, and there's renewed excitement," says Marco Caceres, senior analyst and director of space studies for aerospace consultancy The Teal Group.

Stagnant aerospace market
A little new blood is just what the doctor ordered. At its core, the modern space industry is all about building and launching satellites, and that business has been lagging — largely due to the extensive infrastructure already in orbit. In 2005, the industry had one of the lowest launch rates in its history. Sales in the U.S. space sector increased 3.8 percent, or $1.4 billion, to a record $37 billion in 2005, according to the Aerospace Industries Association. But spending by NASA and other federal agencies accounted for the entirety of that increase — and it lagged far behind the 9.2 percent annual growth for the aerospace industry as a whole. Projections for next year are flat.

"For the past five years, the market has been stagnant," says Caceres. "Everybody has been looking around and saying, is this what the industry is becoming? Or is it just part of a cycle, a temporary lull before a boom?"

If there is a boom coming, the fuse was lit by the 2004 flight of SpaceShipOne, a reusable space vehicle built by aircraft designer Burt Rutan and funded by Microsoft co-founder Paul Allen. (Microsoft is a partner in the MSNBC.com joint venture.) By flying into space twice within two weeks, it won the $10 million Ansari X Prize and proved that small, privately funded efforts could go a long way toward revolutionizing space travel.

The ultimate promise of reusable craft like SpaceShipOne is a vastly reduced launch cost, greater ease of preparing a flight and the prospect of opening space for tourism.

A 1997 NASA study calculated that about one-third of Americans would be interested in traveling to outer space, and a few entrepreneurs already are making it happen: Arlington, Va.,-based Space Adventures has organized three trips into orbit for wealthy private citizens — charging $20 million for a ride on a Soyuz spacecraft and a few days on the international space station.

More accessible alternatives
Of course, a handful of wealthy adventurers do not make a market — and even those involved agree that space tourism isn't ready for the mainstream. "For the time being, it's going to be something that's very expensive," admits Space Adventures Chief Executive Eric Anderson.

So more accessible alternatives are in the works. Richard Branson's Virgin Galactic hopes to take paying passengers on three-hour suborbital flights by early 2009. Branson hopes to reduce the cost of suborbital travel by commercializing technology created by Paul Allen's Mojave Aerospace Ventures; the company is now building SpaceShipTwo for Virgin's purposes.

Late last year, Virgin cut a deal with the state of New Mexico to build a $200 million spaceport. One hundred and fifty founding investors have put down deposits on their $200,000 tickets.

Another effort to create cheaper launch vehicles comes from Elon Musk, the founder of PayPal, who made $1.5 billion when he sold the business to eBay. His company, Space Exploration Technologies (or "SpaceX"), is developing a rocket called Falcon 1. When completed, it should put a half-ton payload into low earth orbit for just $6.7 million — a pittance compared to the $150 million you might spend launching a Boeing Delta 4 or Lockheed Martin Atlas 5 rocket.

Boeing and Lockheed aren't taking the threat lying down. Last May, they announced a plan to merge their space-launch operations into a new venture, the United Launch Alliance, and the Federal Trade Commission is expected to approve the deal sometime this month.

In December, SpaceX scrubbed the rocket's maiden launch only 15 minutes before blastoff. But another attempt is scheduled for Feb. 8. "All eyes are on Elon," says George Whitesides, executive director of the National Space Society, an advocacy group. "A successful flight would be a critical milestone."

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