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By the late 1990s, after decades of consolidation, the aerospace industry in the United States was dominated by giant contractors Boeing, Lockheed Martin, and Northrop Grumman. Today, these and a few other companies, including Orbital Sciences and Space Systems/Loral, are responsible for constructing nearly all U.S. satellites and launch vehicles. The picture is similar globally, with only a handful of firms, such as Arianespace and Khrunichev, selling launch services and space hardware. But several startups, such as SpaceX and Virgin Galactic, have emerged to threaten their dominance by offering cheaper ways to get into space, even if only for a few minutes. SpaceX, for example, offers satellite launches on its Falcon 9 rocket starting at about $50 million, as little as half competitors’ prices.

History is not on their side. In the late 1990s there was a similar burst of entrepreneurial activity in the launch industry when telecommunications companies planned to launch hundreds of satellites to service mobile phones. When the growth of terrestrial cellular networks decimated the customer base, however, these ventures collapsed.

Although the number of potential customer is still a cause for concern (see “Will Customers Boldly Go?”), the new ventures are different from those that failed in the past. Many of them are focusing on suborbital spaceflight, which is cheaper and less technically challenging than sending vehicles into orbit and bringing them back (see “To the Space Station and Beyond”). Whereas SpaceX has spent close to $500 million developing the Falcon 9 and Dragon spacecraft, some suborbital companies, like XCOR Aerospace, peg their development costs at $20 million or less. On the orbital side, they also have a stable anchor customer in NASA, which is pumping billions of dollars in development funds and supply contracts into the private space industry. Several of the startups have the backing of wealthy founders who have deep personal motivations to develop spaceflight. The presence of such entrepreneurs reduces the danger that skittish investors will jump ship.

“None of these things are themselves guarantees of success,” says Charles Lurio, publisher of The Lurio Report, an industry publication. “But there are a lot more pillars supporting this set of ventures than there were in the ’90s.” Those factors are helping new companies attract business. Just days after the inaugural launch of the Falcon 9 last summer, SpaceX won a $492 million contract to launch Iridium’s next-generation communications satellites, beating competitors like Arianespace.

Meanwhile, the startups’ technical progress and the pot of NASA money have tempted established aerospace companies off the sidelines. Orbital Sciences is building a launcher and cargo spacecraft under a NASA contract that could be worth up to $1.9 billion, and Boeing has begun developing its own crewed spacecraft with $18 million in agency study funds. The United Launch Alliance, a joint venture of Boeing and Lockheed Martin that manufactures the Atlas and Delta rockets, has also received a study grant.

The result is a crowded marketplace, with many different systems in the works. NASA has previously acknowledged that a shakeout is likely in the coming years. If the resulting competition drives down the cost of spaceflight further, we may see more entrepreneurial activity in the future. Otherwise, it will probably be another 20 years before the giant aerospace contractors are challenged again.

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