The concept of private enterprise exploiting space to build and grow thriving business ventures is nothing new. It has been around since 1965. That’s when the first commercial satellite, called Early Bird, went into regular revenue service with 240 telephone circuits.

Since then, the private sector has continued to expand its involvement in space activities beyond anything most people could have imagined 50 years ago, when President Kennedy exhorted the nation to land Americans on the moon and return them safely by the end of the 1960s. As celebrated as NASA’s Apollo missions were, climaxing in Neil Armstrong’s radio transmission, “One small step for man…” from the moon’s surface in July 1969, it is easy to overlook the fact that private enterprise has designed, built and helped operate the spacecraft and infrastructure for every US civil and military space mission. And the same goes for every other space mission in the Free World.

Today, the commercial utilization of space is an essential component of telecommunications, financial markets, and a host of other critical sectors. But now the private sector’s involvement in space is fast approaching a new paradigm, courtesy of a growing number of entrepreneurial pioneers, mostly in the United States. They are combining a vision, a can-do spirit and varying degrees of technical knowledge to set the agenda. A few of them—each a high-profile figure in aerospace circles who have a track record of disruptive innovations and self-promotion—have been claiming for a decade that commercial space was on the cusp of a new paradigm, but it never quite materialized. That is about to change, and a new era in commercial space is dawning. This is the decade in which skeptics will witness various firsts in commercial space.

The Players

That the private sector is pushing the boundaries and are on the threshold of achieving what amounts to a critical mass should come as no surprise to anyone who has been paying close attention. Enabling technologies, such as propulsion and aerodynamics, have made huge advances to the point where they can now be adapted to commercial ventures. The private sector also possesses the know-how developed over decades of collaborating with the government on manned and unmanned systems designed specially for space. Adding further impetus to the private sector’s expanding role was the decision by the US government last year to retire the Space Shuttle, despite having no other means to launch Americans into space than to rely on Russia.

Governments will still take the lead in some areas, of course, as in the ongoing militarization of space. In addition, they will continue to partner with private enterprise on many space initiatives and actively support the private sector’s efforts to broaden its participation. Moreover, only nations will be able to afford the most ambitious projects, such as exploring the universe, continuing the search for extraterrestrial life, and searching for asteroids that could be catastrophic on a global scale and developing possible defenses against them. All the same, it is the private sector that’s in the vanguard of opening a new era in space—and it is closer than you might think.

Just as the idea of space tourism was unimaginable 50 years ago except to science fiction writers, the evolutionary paths that commercial space could take in the next decade or two might seem equally far-fetched. But the projects currently taking shape are no fantasy. Even the most well-grounded space program veterans agree that space tourism—among other bold new commercial space ventures—is likely to emerge as a niche but growing industry within the next 10 years.

Like any nascent field of commerce, space tourism will begin modestly. As it now appears, Virgin Galactic, a spin-off of Richard Branson’s Virgin Group, is apt to lead the way. Within the next year or two, a Virgin Galactic SpaceShip will be carried aloft underneath a large aircraft flying high above the ground. After it is released, the unusual looking craft will fall freely to a safe altitude and ignite its rocket engine to transport eight people on a brief excursion to the edge of space. Two of them will be pilots; the other six will be paying customers. In the meantime, scientists and would-be space tourists are taking a short course in suburban Philadelphia to learn what they can expect on a suborbital flight. And on the desert flats outside Truth or Consequences, NM, a new commercial spaceport is nearing completion.

In addition to Virgin Galactic, Rocketplane Global—a venture led by cofounder Charles Lauer—is negotiating agreements to launch its suborbital Rocketplane XP from the Netherlands and Spain. Besides flying space tourists and spaced-based research experiments, the vehicle is being designed to deploy very small spacecraft, called nanosatellites. Lauer’s plan to establish a spaceport near Barcelona has the support of local airport authorities and the regional government. He envisions suborbital tours once or twice a week as early as 2015, with seats costing US$200,000 apiece. There is little question the target market is there—there already is a waiting list of customers. Keep in mind that manufacturers of exotic sports cars costing substantially more than US$200,000 also have multiyear waiting lists for their trophy products.

Russia’s private sector is trying to get into the act as well. Orbital Technologies proposes to build a modest orbiting hotel and commercial space laboratory and open for business before the end of the decade. Orbital is collaborating with Russian space agency Roscosmos and Rocket and Space Corp., Energia to develop the Commercial Space Station (CSS), with financing from private investors. The company is working with Vienna-based Space Adventures to market flights to the CSS, with prices comparable to flying tourists to the International Space Station (ISS)—US$50-60 million. That is the same price as top-of-the-line business jets, such as the Gulfstream 650 or the Bombardier Global Express.

“The commercialization of space is a fait accompli, and the thing that will change the whole equation is [space] tourism to low-Earth orbit, with revenue passengers circling our planet for a couple of days experiencing weightlessness and photographing Earth,” says futurist Norman R. Augustine A former aerospace industry executive, Augustine was appointed by President George W. Bush and more recently President Barack Obama to lead blue ribbon panels tasked with making recommendations on future US space policy. Augustine is famous for a book he published in 1984 called Augustine’s Laws, a series of often quoted tongue-in-cheek aphorisms spanning management, technology and defense spending that are proving to be remarkably prescient in the current resource-constrained environment. “There is enough interest by people worldwide that there is absolutely no doubt it will happen; it is a question of when, not if,” he says. “As it develops, prices will come down through economies of scale, safety will go up and the practice will become routine.”

Government and Private Sector Collaboration

Impossibly ambitious as some of these ventures may sound, the entrepreneurs pursing their vision of the future are finding increased credibility and acceptance from financial backers. In some respects, the profile of the commercialization of space mimics the birth of commercial air transportation, which can be traced back to the aviation pioneers of the early 20th century. Besides their love of flying, they were risk takers who shared a can-do spirit and a vision for how airplanes could be used commercially. Along the way, government was there to help.

In 1918, when the US Postal Service won the financial backing of Congress to begin experimenting with airmail service, adventurous aviators jumped at the chance to fly mail as private operators, using Curtiss Jenny aircrafts made mostly of wood and canvas. By the 1920s, the Postal Service had developed its own airmail network based on a transcontinental backbone between New York and San Francisco. To supplant this service, the government offered 12 contracts for spur routes to independent bidders. In 1925, the Ford Motor Co. purchased the Stout Aircraft Co. and began construction of the iconic, Ford Trimotor airplane, with its more durable, all-metal airframe that could better weather and potentially dangerous flying conditions. With a 12-passenger capacity—the same as Virgin Galactic’s SpaceShip—the Trimotor made passenger service profitable for those who were able to manage the business properly. Through time and mergers, some of the independent bidders that won airmail routes would evolve into Pan Am, Trans World Airlines, and other iconic names in commercial air transportation.

Fast-forward 85 years, to private suborbital rocket rides launching from New Mexico and NASA astronauts getting ready for what eventually could become the equivalent of taxi rides to the ISS. In the United States, where NASA remains one of the most underfunded government agencies relative to its broad mandate, there is growing recognition that the time has come for the private sector to take on some jobs that only government has been allowed to perform. This recognition has led to a policy shift, going as far as funneling seed money into the development of commercial spacecraft capable of transporting humans. The principal motivations: reliability and cost. The United States pays its former Cold War adversary US$60 million to ferry each American to the International Space Station (ISS).

Until a private company is up for the job, Russia will have a monopoly. Space Exploration Technologies, or SpaceX, led by Elon Musk out of the Howard Hughes mold, figures his company can do the job for less than half the current going rate—and SpaceX is just one of several companies interested in the work. Currently the Federal Aviation Administration is working on the first license for a spacecraft to re-enter Earth’s atmosphere. It is just the beginning of what’s in store in the next few years and almost certainly will accelerate beyond mid-decade.

The Strategic Benefits

One of the major conclusions of the most recent presidential commission led by Augustine was that NASA’s Constellation program for developing a spaceflight vehicle capable of carrying humans—essentially a successor to the Space Shuttle—was fiscally unsustainable. NASA has yet to issue requests for proposals for end-to-end crew services to and from the International Space Station. However, it expects to begin using commercial cargo services developed under a $500-million Commercial Orbital Transportation Services (COTS) seed-money program to resupply the ISS within the next year or two. Such a service would reduce, if not eliminate the need for US, European, Canadian, and Japanese astronauts to reach orbit via Russia’s costly Soyuz space capsules.

Of course, SpaceX isn’t the only game in town. It is in competition with Orbital Sciences Corp., which traces its roots to the early 1980s, when its founders met at Harvard Business School, and worked together on a project for NASA to examine the viability of commercial satellites. The founders believed they could make space technology more affordable. Both companies have signed Commercial Resupply Services agreements with NASA valued at US$3.5 billion. NASA will have its own requirements for human transportation to the ISS but will allow private developers to design spacecraft to meet not only its requirements, but those of other customers as well. Both NASA and space entrepreneurs know the market is there; the United States and Russia have been flying other countries’ astronauts to low-Earth orbit since 1978.

Still to be determined is whether NASA wants what amounts to a “taxi,” with a private crew piloting NASA astronauts to the orbiting space station, or whether it wants the ability to basically rent a privately designed and built spacecraft that NASA pilots could fly to the ISS themselves. The spacecraft would remain docked at the space station and serve as a lifeboat until the astronauts were ready for their return voyage to Earth. Along similar lines, Entrepreneur Robert Bigelow has invested more than US$200 million in the development of inflatable orbital habitats that he plans to lease to industry and countries who cannot afford to build their own human spaceflight hardware.

Whatever combination of private vendors NASA hires, there is no question the agency clearly is on a trajectory of bringing commercial cargo and crew vehicles developed by the private sector into US spaceflight operations. Planetary scientist S. Alan Stern, NASA’s former associate administrator for the Science Mission Directorate, believes it is just a matter of time before private operators begin providing some manned space flight missions. “That is when commercial space will move from the minor leagues into the big leagues,” he said.

The European Space Agency (ESA) and its member governments also are moving toward handing off more of what ESA has done historically to the private sector—from Earth imaging and commercial communications services, to launch and crew support. And European companies are anticipating the shift, just as they are in the United States. For example, the Astrium division of European aerospace and defense giant EADS, is spending millions of dollars of its own money to privatize satellite communications and remote sensing services. Astrium was created in 2003 after the UK Ministry of Defense decided to outsource secure satellite telecommunications to the private sector. Initially the company was guaranteed a market for its products but had to shoulder the risk building and launching the United Kingdom’s large military satellites. For Earth observation services, Astrium is funding 100 percent of the investment needed for a constellation of its SPOT 6 and SPOT 7 satellites, despite the absence of any guaranteed customers.

The Challenges

As private enterprise begins to undertake more of the space missions that only governments have performed—both manned and unmanned—they will be tested by the same rigorous measure of success that govern traditional business ventures: return on investment. Some financial backers will have the risk-tolerance to stick with projects that experience ups and downs before they begin earning a profit and can sustain attractive returns. Other venture capitalists will be more cautious; they will remember the loss of billions of dollars of private equity capital on commercial space projects that had all the earmarks of becoming hugely successful.

For example, in the late 1990s several deep-pocketed companies launched major ventures around providing satellite-based mobile telephone services globally, based on constellations of satellites in low-Earth orbit. Some of these ventures, such as Iridium and Globalstar, had spent hundreds of millions of dollars building those constellations when they were upended by the dramatic collapse of the business model. Technical problems played a role, as did the high cost of the service. But it was the failure of everyone connected with the projects to foresee the rapid global deployment of terrestrial mobile standards that was the business model’s main undoing—and made satellite phones unnecessary.

What could rattle the financial backers of commercial space projects to the core? The first accident involving the loss of life, for starters. Such an event is inevitable, just as commercial and business aircraft crash somewhere in the world every year. In regions where safety is the first priority, such as North America and Western Europe, fatal crashes are remarkably rare. Still, the flying public and aviation professionals alike generally understand the potential is always there and that risk is a part of flying commercially, albeit a very small risk.

Nonetheless, it remains to be seen how the public, government regulators, would-be customers, and private space transportation service providers will respond to the loss of a space plane and its crew and passengers. All stakeholders will need to learn how to keep such tragedies in perspective—assuming, of course, that project principals can show that safety is Job No. 1. As Stern correctly points out, risk is a part of all forms of transportation. If commercial space flight is to flourish, failure cannot be allowed to bring it to a halt, anymore than the fatal crash of a commercial airliner or a bullet train should stop either of those services, and doesn’t. As private enterprises continue to prepare for the day when they are taking tourists on excursions in space and ferrying astronauts to the ISS and other space habitats, an ongoing and unwavering commitment to safety will be paramount.

The other big challenge ahead of private enterprise in space is current international space law, which is based mainly on the doctrine of res communis of the Outer Space Treaty. Simply put, it means that space belongs to everyone. That is true, of course. But as a practical matter, it effectively will limit some kinds of commercial space ventures we otherwise might expect to see in, say, the decade starting in 2020. The reason is that reshaping international space law will be neither simple nor expedient. One need only consider how torturous it is for nations to reach agreements on matters of common interest on Earth to appreciate how challenging it will be for the global community to negotiate international treaties pertaining to the many possible uses of space. Under the Outer Space Treaty, anti-satellite weapons are banned. However, that didn’t stop China in 2007 from destroying one of its own dead satellites in orbit. In the process of demonstrating how to obliterate an adversary’s satellite—whether it is a telecommunications satellite serving millions of people, or a military satellite to warn of strategic missile launches—China greatly exacerbated the problem of space debris that threatens all manned and unmanned spacecraft orbiting Earth.

The Outer Space Treaty also forbids nations from claiming territory in space; a companion Moon Treaty extends the prohibition to private legal entities. The United States is not a signatory to the Moon Treaty, although it is widely perceived to be accepted international law. Curiously, the Moon Treaty does not forbid mineral exploitation, except under the oversight of an international body. But it does ban staking claims on exterrestrial property. So does the ban that applies to the moon also apply to, say, Mars, and how restrictive would it be in practice? One of Elon Musk’s long-range visions is to establish a human colony on the Red Planet. Those questions likely will be answered only after long and difficult negotiations involving multiple countries.

At a recent meeting of a special committee of the United Nations on the outlook for the peaceful uses of space, there was broad agreement that much worked was needed to hammer out a legal framework that is in step with the times. As it stands, the framework lags the development of new technologies, as well as the rapid pace that the private sector is making toward expanding the commercialization of space activities. Many member nations refuse to accept key treaties, which poses one type of problem. In addition, some nations believe there are possible loopholes in the current legal regime. Others are skeptical about the ability of the regime to effectively address current challenges to certain space activities. None of these hurdles, including the current framework of space law, may be roadblocks per se to the longer-term progress of the commercialization of space. But they are likely to govern the speed at which the private sector will be able to implement some of the bolder plans they wish to pursue. Perhaps that is just as well. Unlike the early days of commercial aviation, the next era in the commercialization of space is no activity to be done by the seat of the pants, no matter how ambitious or inspiring the project. All the same, there is little doubt that a greatly expanded role for the private sector in space is within sight and, as Augustine put it so succinctly, a fait accompli.

Anthony Velocci is Editor-in-Chief of Aviation Week & Space Technology and editorial leader of Aviation Week products. His awards include the McGraw-Hill Companies’ Corporate Achievement Award for Editorial Excellence, and the Royal Aeronautical Society’s Aerospace Journalist of the Year award.