Photo: Via Satellite archive illustration

There is little doubt that activities in space will be crucial to the future economic wellbeing of humans, apart from important scientific and other discoveries. Future economic growth — from the value of current Earth observation and telecommunication activities to future mining and tourism possibilities — will increasingly be a function of actions taken in outer space. However, our regulation of space activity remains firmly Earth-bound. That creates risks where some firms may develop dominant positions with insufficient oversight.

The Starlink network has grown to more than 6,000 operational satellites, two-thirds of all active spacecraft orbiting the Earth today. Project Kuiper — being developed by Amazon — will begin launching its network and plans to have more than 3,000 satellites delivering broadband services. Both Starlink and Kuiper have access to their own launch providers with SpaceX and Blue Origin, potentially allowing them significant control over the space they are occupying.

Once out in space, rendezvous proximity operations (RPOs) — missions which involve the operation of two (or more) independent space objects that purposefully maneuver to within close “proximity” of each other — are increasingly contentious. These are crucial to further development of space activity: they allow servicing, refueling, construction and human activities. But such maneuvers can allow for spying, close-up inspection and even interception of communications. Even without ill-intent they can unintentionally affect the operation of nearby satellites or other vehicles. This has prompted some countries, like France, to invest in “bodyguard” satellites to deter unfriendly RPOs.

From the scramble to get into space to the desire to exert control once there, the extraterrestrial sphere of human activities risks replicating very terrestrial behaviors of the ‘Wild West’, the scramble for oil in the early 20^th century and for the internet from the early 21^st century. We continue to live with the repercussions of earlier waves of largely unregulated attempts to grab territory, consumers, and supply chains before rules can be established to promote an efficient market.

There are three principal issues that economic regulation should seek to address. The first is to provide secure property rights for those making large-scale investments in an uncertain climate. The second is to prevent the abuse of any dominant positions that are developed from first mover or similar advantages. The third is to support the efficient use of common or shared resources.

Secure property rights lie at the center of promoting new economic activity. Large investments in everything from launch capabilities to platforms with various functions in outer space to mining, will only be made if investors are confident in their ability to earn a fair return from those assets. In some cases, this is regulated on a purely bilateral basis: NASA, or other space agencies, sign long-term contracts for launch capabilities that give investors sufficient certainty to proceed. In other cases, more work is needed to define property rights in space and how they will be enforced by Earth-bound courts.

Already we are seeing some firms emerge with very large shares of these growing markets. It is necessary to be clear about the definition of relevant markets, understand whether some are likely to be inherently oligopolistic (e.g. launch facilities with their large economies of scale) and put in place measures that balance incentives to develop those capabilities while preventing them from becoming bottlenecks for others dependent on their capabilities. This is traditionally the responsibility of competition authorities, government ministries or independent economic regulators. As they turn their attention to space-based activities, new thinking will be needed.

Again, the lessons of history can be a guide to how best to apply economic regulation to critical assets: to protect investors and consumers. This includes how we regulate everything from major energy infrastructure to how we regulate crucial mobile infrastructure, water pipes, and major investments in aviation, rail, and other infrastructure.

There is the added challenge of regulating in space without national jurisdictions: no single national regulator can impose its authority. However, this is not a unique situation: there is already some international regulation of space activity, it is just not moving fast enough nor articulating clearly enough the economic framework and priorities for multilateral action. There are also many examples, on Earth, of infrastructure assets, like pipelines and telecommunication cables, that cross multiple jurisdictions with suitable economic regulation in place.

Finally, ‘externalities’ (when the action of one party affects another party outside of existing definitions of property rights) mean that regulation of common or shared resources will be needed.

The clearest example is the already advanced regulation of spectrum: spectrum use cannot be a ‘free for all’ but needs to be allocated otherwise interference from multiple users of the same spectrum make it useless to all. Even in this relatively well developed area, there are new debates brought on by the space race: new capabilities of space-based resources drawing into question historic allocations and raising the question of how best to allocate spectrum to take this new activity into account.

There are other areas where similar or improved regulation will be needed – including impacts on Earth of an increasingly busy “sky”, the RPOs mentioned above and their potential to interfere indirectly with the operation of other satellites and even the environmental consequences of increased launches.

We have learned a lot from past experience about how to regulate markets effectively. From the extensive economic literature about Standard Oil and how these forces played out in the early development of the oil and gas sectors, to the economic regulation of large infrastructure investments, to more contemporary efforts to regulate the internet, and the economics of the virtual world.

In the case of Standard Oil, the U.S. Supreme Court ultimately ordered its break-up because it had been allowed to grow too big. The resulting break-up into 43 separate companies and subsequent re-configuration of the sector might not have been needed with earlier intervention. Similar issues are currently playing out in American and European courts looking at Google and other large internet companies. In other areas, like electricity and gas transmission, parts of mobile phone networks and elsewhere, single geographically dominant providers are accepted but have their returns regulated and attempts are made to preserve incentives for them to invest and innovate.

The effective regulation of outer space activity will be a spur to innovation and growth. Developing that regulation is undoubtedly complicated by the need to bring together many nations with very different views and interests. It will be even more complicated if we do not come to those discussions with a clear view about the right approach: how best to safeguard property rights, prevent abuse of dominance, and promote the efficient use of shared resources.

Matthew Bell

Matthew Bell is a Director at consulting firm Frontier Economics. He is a contributory expert to The Regulatory Horizons Council’s report produced for the UK Government, “The Future of Space Technologies: Plugging the Gaps in Space.”