Is SpaceX Still A “Commercial” Launch Provider?

The August 16 issue of Flight International contains a provocative story about the aspiration of Space Exploration Technologies Corporation (SpaceX) founder Elon Musk to help humanity become a “multiplanet species” by opening the way to colonization of Mars. I think Musk is right about humanity needing to hedge its bets by not being totally dependent on a single planet, because the geological record suggests that every hundred million years or so most of the life on earth is wiped out by an asteroid hit. However, I found Flight’s assertion that SpaceX “is widely considered the frontrunner in the quest for manned commercial spaceflight” somewhat puzzling.

Commercial space companies, in case you’re not clued in, are companies said to operate differently from traditional launch providers like Boeing and Lockheed Martin by relying mainly on private-sector demand and business practices. What puzzles me about applying that term to SpaceX is that if you read the story in Flight, it’s all about government contracts with agencies like NASA and the National Reconnaissance Office. SpaceX may have started out as an entrepreneurial, market-driven venture, but most of its future revenues look likely to come from Uncle Sam, just like the big boys. Since those older companies also are longstanding players in the commercial space sector — among other things, they make communications satellites for private users — it isn’t so clear what makes SpaceX different.

Maybe the difference resides in the fact that United Launch Alliance, the joint venture owned by Boeing and Lockheed, seldom launches commercial satellites. It would like to, but its rockets typically cost too much compared with the launch vehicles offered by other providers like Arianespace, China Great Wall Industry Corporation, and now SpaceX. SpaceX says its lean, vertically-integrated business model has enabled it to place payloads into orbit for much less than traditional launch providers. Its list prices are so low, in fact, that even the Chinese say they can’t compete. So maybe SpaceX really is different — even though its prices sometimes end up being much higher than initially advertised.

However, one competitive advantage SpaceX has is that it is not subject to the same rules and regulations that the federal government imposes on traditional launch providers. When you are spending several hundred million dollars to loft astronauts or a complex spy satellite into orbit, the government tends to be very picky about how every facet of the launch enterprise is carried out. SpaceX has largely escaped that oversight — which may be one reason why three of its first seven launch attempts failed. But if the company wants to play a role in NASA’s manned spaceflight program or in launching satellites for the National Reconnaissance Office, its exemption from federal rules is likely to end, and that would presumably result in much higher overhead costs at each stage in the launch process.

So if a company gets most of its revenues from the government and must comply with a raft of federal performance standards, is it still a “commercial” company? And what happens to the handful of commercial customers it has attracted when the government customer starts calling the shots? Perhaps it follows the same path that Apple did, starting out as an enemy of the status quo and ending up looking a lot like what it formerly criticized.