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Why does the US government need Elon Musk and SpaceX so badly?

Musk is the smartest, most talented guy on the planet and he's actually trying to do some good, which is more than I can say about most politicians and business magnates.

Yes, he shoots his mouth off at times and is quirky. Hey, that sounds like the Editor of the Spritzler Report!

Space Business: Codependent

Why does the US government need Elon Musk and SpaceX so badly?

This story was published on our Space Business newsletter, a glimpse at the economic possibilities of the extraterrestrial sphere. Uncover the companies and innovators behind growing investment in rockets, satellites, and more.

By Tim Fernholz, Quartz Media

Aug 24, 2023

The US government needs Elon Musk’s SpaceX to do much of what it does in space, whether that’s scientific exploration, launching satellites, or providing communications to Ukraine’s military as it battles Russian invaders.

This dependency is proving to be an issue for government officials, who rely on SpaceX in the absence of other alternatives but chafe under Musk’s erratic behavior and connections to authoritarian foreign governments. In a New Yorker piece this week, Ronan Farrow details these dynamics, concluding that Musk “sought out business opportunities in crucial areas where, after decades of privatization, the state has receded.”

I’m not sure that’s what happened, at least when it comes to SpaceX. The areas that Musk’s company dominates are sectors the US government has never taken seriously or intentionally moved past. Indeed, the US has spent billions to try and build up private alternatives to SpaceX, but those firms, notably Boeing and Blue Origin, have failed to deliver. Consider two case studies...

Case study 1

The job? Launching satellites and humans into space.

The problem? SpaceX’s Falcon 9 and Falcon Heavy are the only on-demand vehicles that can fly large satellites into orbit in the western world, and its Dragon spacecraft is the only one that can safely carry people.

How it used to work? Before SpaceX, most American satellites were launched by foreign countries or a US monopoly called United Launch Alliance, a joint venture between Boeing and Lockheed Martin cost the government billions more than necessary until SpaceX arrived. Astronauts and satellites both flew on the Space Shuttle, which was retired in 2011 after being deemed too unsafe.

Why only SpaceX? The US has supported the current version of ULA and Jeff Bezos’s Blue Origin with development funding and launch contracts, with the expectation they would deliver new rockets on time. They haven’t. NASA gave Boeing more than twice as much money as it gave SpaceX to develop an alternate crewed vehicle, but it is years behind schedule.

Could the government do this itself? Private contractors have always been at the business end of spacecraft-building, but the government once took the lead on designing the vehicles. That hasn’t been cheap or efficient. The most recent rocket and human-rated spacecraft to follow this model, NASA’s Space Launch System and Orion space capsule, cost $50 billion to develop and has flown once. SpaceX has earned about $13.5 billion from NASA in the last two decades, flying dozens of missions.

Case study 2

The job? Delivering satellite communications to Ukraine.

The problem? SpaceX’s Starlink satellite network is the only system with enough capacity in Ukraine and the ability to quickly build new terminals for users.

How it used to work? The US government achieves satellite communications through contracts with satellite companies like Iridium and, for its most secure connections, through satellites built by US companies but operated by the US Space Force. None of these networks has the ability to provide communications services to the entire Ukrainian state.

Why only SpaceX? Satellite comms is a hard business. Most space networks are designed to operate in specific areas and with just enough capacity to make money. But Starlink is pioneering a novel approach where thousands of small satellites, flying close to Earth, provide coverage everywhere. At the time the idea was announced, it was widely expected to fail. The only other company attempting this model, OneWeb, already went bankrupt, and it is still an open question if Starlink will succeed. There are other entrants coming to this market, notably Amazon’s Kuiper, but it’s an incredible stroke of luck for Musk that Ukraine’s needs emerged just as SpaceX was desperately searching for new markets around the world.

Could the government do this itself? I’m trying to imagine the politics of any American president announcing a $10 billion government investment in an unprecedented satellite network that would rely on non-American users to break even. That said, the US has been inspired by the many-small-satellites vision of space networks, and started a Space Development Agency in 2019 that is building out a satellite constellation along those lines. That system could potentially deliver similar connectivity to the US and its allies in the future.

In both these cases, we don’t see the state receding; we actually see the state capacity increasing thanks to its partnership with SpaceX. NASA chose to spend its money building a moon rocket, and let Musk co-invest his own money to come up with a satellite launch vehicle; now it saves money on space probes and does more science at the International Space Station. The Pentagon didn’t spend any money at all to build Starlink, but now can deploy an unprecedented communications network to help a military ally.

A Pentagon official tells Farrow that it “sucks” to live in a world where “Elon runs this company and it is a private business under his control.” I get the sentiment, but is he aware of how every other military capability is provided in the US? The problem of the military industrial complex isn’t limited to SpaceX, or even the executive branch—pork-barrel loving lawmakers helped create the conditions for SpaceX’s rivals to wallow in the trough. And SpaceX wouldn’t stand alone if companies like Boeing, which receive much more generous treatment from the government, hadn’t failed repeatedly to deliver.

None of that changes the real problem of depending on a single company for so much. The hope is that a SpaceX rival can execute well enough to give the US other options. But the government can do its part to keep its leverage, recognizing that SpaceX is dependent on government funding, enforcing the basic regulations governing space activity, and writing more thoughtful contracts. In the recent agreement between the Pentagon and SpaceX to provide Starlink service in Ukraine—the cost of which is still unknown—the military reportedly retained control of the signal. That’s a start.

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