A New Frontier? How Countries and Corporations are Competing to Win the 'Space Race'

From telecoms to cyber-warfare and commercial space flights; Tom Barker-Weinberger examines all this and more in this wide-ranging analysis of the space-tech sector.

In 1967, the ‘Outer Space Treaty’ declared that space, and its resources, were the ‘province of all mankind’. The force of this noble, equitable proclamation has been stunted by cold reality, and the fact that immense resources and technological know-how are necessary to fully utilise the benefits of space exploration. Therefore, such exploration has been typically dominated by superpowers such as the USA, Russia and China, alongside wealthy states through collaborative bodies such as the European Space Agency.

In the twenty-first century, however, as technological expertise has become both more advanced and widespread, and the practical and commercial incentives for space exploration have increased, more countries and private companies have invested substantially in space and other related technology.

One country where this drive is particularly evident, both in the public and private sector, is the United Kingdom. In 2018, the Space Industry Act was introduced, creating a regulatory framework for commercial space flight. Then in July this year, the government opened a consultation with the industry, aimed at facilitating the Space Industry Act and creating a supportive regulatory environment for commercial space travel.

The title of this consultation, ‘Unlocking Commercial Spaceflight for the UK’, signifies the desire of the UK government to encourage significant growth in this sector. Indeed, the government has stated its aim of capturing a 10% share for the UK in the global commercial space flight market by 2030. This consultation also represents a shift to a much more interventionist position on the part of the Government, really underlining its intention to support British leadership in the global space industry.

Activity in the business world indicates that the global space industry is on an upwards trajectory. In Europe, and Germany in particular, start-ups have joined the commercial space race. HyImpulse and Rocket Factory Augsburg are two of three new German rocket manufacturers, along with a Munich start-up that is betting on a boom in demand for the delivery of small satellites into orbit. Isar Aerospace has set the end of 2021 as its target date for launching its first Spectrum rockets. The company’s longer-term strategy aims to launch 20 flights annually.

Impeding the ambitions, however, of Isar Aerospace and other European space-tech start-ups is a lack of government support relative to other international competitors, particularly those based in the US. For instance, government contracts have been instrumental in enabling California-based Rocket Lab to gain a leading position in the commercial space-flight sector. Therefore, the UK government views Brexit as an opportunity to diverge from EU state aid rules and offer more substantial support to nascent industries, sectors, and companies, including those focused on space technology.

Space-tech startups face stiff competition from established and versatile technology companies. Amazon and SpaceX have very publicly invested billions of dollars to fund the launches of tens of thousands of small satellites. This will enable them to provide broadband internet and meet the predicted growth in demand for communications technology in the next decade, especially in emerging markets such as Africa. The British Government clearly sees satellite internet provision as potentially lucrative, having joined with India’s Bharti Enterprises in a $1bn bid for satellite broadband operator OneWeb this summer.

Furthermore, space represents a vital strategic and national security front for the globe’s major military powers, many of whom are already engaged in a struggle for supremacy in space. President Trump announcing the creation of a dedicated US ‘space force’ is a sign of things to come, as space becomes yet another frontier where states such as China and Russia attempt to challenge US military dominance.

Destabilising Russian and Chinese cyber-attacks targeted at western countries, including the US and the UK, highlight both the importance and vulnerability of many systems and operations, including navigation, financial transactions and online communications, which rely heavily on space satellites. These systems are not only vulnerable to attacks by hostile states; recent reports suggest that militant groups such as ISIS are within reach of acquiring satellite-jamming technology.

Responding to this new landscape, UK Defence Secretary Ben Wallace stated that the military would be ‘letting go’ of some of its traditional equipment to facilitate investment in cyber and space capabilities. The Ministry of Defence therefore appears to be transitioning away from more traditional modes of combat to more tech-enabled war strategies. Wallace has explained that the UK’s ‘future force will be about speed, readiness and resilience, operating much more in the newest domains of space, cyber and sub-sea’.

The UK private sector, having previously been reluctant to invest in commercial space activities in the absence of a clear regulatory framework, will potentially begin to increase its involvement in this sphere. This could take the form of investing in dynamic ventures such as spaceports in the UK. With satellites accounting for a rapidly growing segment of the commercial space market, and McKinsey forecasting that 50,000 low Earth orbit satellites will be in orbit within 10 years, having launch pads in the UK would be economically and strategically invaluable.

Space sector start-ups in the UK could attract investment from venture capitalists, as was the case in Germany: Isar’s investors included Airbus Ventures and venture capital firm Earlybird. With the amount of dry-powder in the industry, private equity investment may also become highly influential for space-tech firms whose valuations, in a favourable economic environment, could sky-rocket in a similar fashion to tech stocks during the coronavirus pandemic.

The work of advisory firms will be highly influential as the space industry develops. This is particularly the case in the legal sector, since much of the legal framework for commercial space activity is untested or not yet in place. Therefore, law firms will be crucial in helping clients to navigate regulatory and compliance issues as they attempt to capitalize on the opportunities that space-tech presents. Law firms with strong practices in technology and communications will be well-positioned to advise on such matters. Furthermore, since the Civil Aviation Authority will be undertaking all regulatory functions in relation to the Space Industry Act of 2018, legal expertise in aviation matters can also benefit clients with interests in space technology.

The only certainty in an industry with such rapidly advancing technology is uncertainty. Nonetheless, given the growing importance of space-tech and the wide range of sectors it directly or indirectly influences, from transport and telecoms to cyber-warfare and banking systems, developments in this area are well worth keeping an eye on.