Making money in space: US firms set for liftoff

The setting: 1984, somewhere in the Pacific.

Just after dawn, a tall, white rocket - not owned by any government - roars into space with a valuable payload.

No, it's not the beginning of a James Bond movie. But it could be the start of a Horatio Alger story, a story about US private enterprise making money in space.

Spurred by European and Japanese competition for the lucrative satellite-launching market, several US companies are vying for a slice of the action.

And while it's still early to predict the long-term potential for the involvement of private enterprise in space, experts in business and government agree growth is inevitable.

In the future, the ''private sector is going to be taking over a larger and larger share of the activities in space, while government's share will become less and less,'' says Larry Wolken, a specialist in the economic development of space at the Center for Education and Research in Free Enterprise at Texas A&M University.

David Hannah Jr., for instance, hopes to put America's first privately launched satellite into orbit in 1984.

Mr. Hannah, the chairman of Space Services Inc. of America (SSI), took a big step toward that goal last week. His Houston-based firm launched a rocket - Conestoga I (see photo) - made from surplus parts on a 101/2-minute flight.

Blastoff came just two months before the US space shuttle is scheduled to make its first attempt at placing satellites in orbit.

Besides Hannah's Space Services, several other firms are said to be interested in entering the private rocket-launching market. At the same time, the New Jersey firm Space Transportation Company has offered to fund a shuttle dedicated to private uses. Still other firms are interested in providing ground services for the shuttle operation.

Says Mr. Hannah of his firm's first successful launch, ''It was like winning a football game. But we realize the real job is still in front of us.''

Buoyed by its new-found credibility, his company is now searching for a permanent launch site in the Pacific, possibly on the big island of Hawaii. The firm is also negotiating with the National Aeronautics and Space Administration (NASA) to lease launch-pad space at Cape Canaveral to shoot its heftiest payloads into high orbit.

Another space entrepreneur and president of Space Transportation Company, Klaus Heiss, proposes to buy a $1 billion space shuttle from Rockwell International that would be financed by private investors.

NASA currently plans to fund four shuttles. Under the proposed agreement, Dr. Heiss's shuttle would provide a fifth orbiter to be handed over to NASA in return for the right to sell cargo space on the US shuttle fleet to foreign and commercial users.

Details of the agreement haven't been ironed out, but the fifth shuttle would be dedicated to commercial uses. (Both NASA and the US Air Force are in favor of adding a fifth shuttle to the fleet.)

Looking ahead 10 or 12 years, Heiss says, the real economic test of the US space program will come when space transportation gets private financing.

''History shows that you have a certain built-in check when people have to put their money where their mouth is,'' says Heiss, who directed an independent economic analysis of the shuttle program in the early 1970s that was used to help sell Congress on the program.

Heiss says five shuttles are required to make the system turn a profit. Also needed, he says, is a coherent structure for marketing the services the shuttle will provide. Otherwise, he warns, the Europeans and Japanese could snatch up the lion's share of the commercial satellite-launching market.

Heiss predicts that up to 200 large communications satellites for civilian uses will be in orbit by 1995. This translates into a potential worldwide market worth approximately $30 billion, he says, half of which could be up for competitive grabs.

''The Europeans did exactly what the US should have done a long time ago - set up a commercial organization to market launch services for satellites,'' says Heiss.

Those pushing for US private business involvement are quick to thump a fist on a major report from the Office of Technology Assessment. The report, issued in June, found that foreign competition is beginning to threaten US leadership in commercially profitable space technology.

With the shuttle's timetable and cargo charges still up in the air, the report says US businesses have already bought satellite-launch services from the European Space Agency's Ariane program.

The Ariane is expected to be turned over to a consortium of private companies and banks, called Arianespace, in 1986. It has firm orders worth about $400 million to loft 24 satellites over the next three years and is in the midst of negotiating other deals.

However, Ariane's European backers got a cold slap last week when their first satellite launch fizzled, 14 minutes after the rocket blasted off from the coast of South America.

The Japanese, while a less immediate concern to the US, are also working toward the day when they'll market satellite-launching services - possibly as early as the late 1980s.

Hannah of SSI says that part of the importance of his company's activities is the effect they may have in blazing a trail for other domestic companies to follow.

''We've established a path through the government regulations,'' he says, predicting federal regulations of private launches are less than two years away.

One industry observer says at least two other firms besides SSI are keeping a hungry eye on the commercial satellite-launching market, although SSI is by far in the domestic lead. NASA officials say more than a dozen companies are jockeying for tighter proprietary relationships of various sorts with the US space agency. Not all of these firms are hankering to buy shuttles or build their own rockets.

''A lot of these companies are brand new,'' says Ronald Philips, director of technology utilization in NASA's industry affairs office. ''They're coming into this to take part in low-gravity experiments or the space transportation system.''

Some firms are offering to handle toxic fuels and prepare cargoes for the shuttle.

''In some cases we already have agreements to do some work or cooperate in some way with companies,'' says Mr. Philips. For example, McDonnell Douglas has a joint-venture arrangement with Johnson & Johnson and NASA to fly low-gravity pharmaceutical manufacturing experiments aboard six shuttle flights.

Private-sector interest is starting to take off at this point, says Philips. ''As people perceive the feasibility of space transportation, they're realizing ways of becoming involved.''

NASA officials seem eager to see private enterprise move forward onto what was once strictly government turf.

''We've gotten a lot of help from NASA,'' says Space Service's Hannah. Last year the firm hoped to try a test launch, but a valve froze during a preflight test and the rocket blew up on the launch pad. A consultant from NASA advised SSI to switch from liquid to more stable solid-fuel engines.

The Reagan administration, for its part, has endorsed the idea of commercial involvement in space. In a policy statement issued this summer, President Reagan called for ''a climate conducive to expanded private-sector investment and involvement in space activities.''

Sen. Harrison Schmitt (R) of New Mexico, a former astronaut and a Senate gadfly on space issues, says he thinks the President is holding back on making a stronger space policy because of ''preoccupation with the budgetary problems.''

He says, ''Clearly, you won't have the private sector operating your defense programs in space, but beyond that, I don't think it's clear what the limitations are.''

Congress itself has made low passes at various pieces of legislation relating to US space policy and the private sector. One bill, introduced by Sen. Howard Cannon (D) of Nevada, would establish regulations for rocket launches by private companies.

''It was introduced mainly for discussion purposes,'' says one senior staffer for the Senate Commerce Committee. ''We have no immediate intention of pushing it.''

The key attraction of private rocket services is the ability to tailor launches to fit commercial needs. In addition, private firms are able to make quicker decisions and market their wares more aggressively, as well as enter binding agreements.

''The government just isn't set up to do that,'' says Mark Chartrand, executive director of the National Space Institute, a citizens-advocacy space organization that favors greater private-sector involvement in space.

NASA administrator James Beggs ''can't even take a potential customer to lunch - it's against the law,'' says Mr. Chartrand.

In the case of Space Services, though, personalized attention won't be cheap. It will cost between $3 million to $5 million for SSI to offer the same launching services the space shuttle will offer for less than half as much.

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