Public Infrastructure Investments for Space Market Development

Abstract

Advanced space technology systems often face high fixed costs, can serve limited non-government demand, and are significantly driven by non-market motivations. While increased entrepreneurial activity and national ambitions in space have encouraged planners at public space agencies to develop markets around such systems, the very factors that make the recent growth of the space economy so remarkable also challenge planners' efforts to develop and sustain markets for space-related goods and services. I propose a graphical framework to visualize the number of competitors a market can sustain as a function of the industry's cost structure; the distribution of government support across direct purchases, direct investments, and shared infrastructure; and the magnitude of non-government demand. Building on public goods theory, the framework shows how marginal dollars invested in shared infrastructure can create non-rival benefits supporting more competitors per dollar than direct purchases or subsidies. I demonstrate the framework with a stylized application inspired by NASA's Commercial LEO Destinations program. Under cost and demand conditions consistent with public data, independent stations generate industry-wide losses of \$355 million annually, while shared core infrastructure enables industry-wide profits of \$154 million annually. I also outline key directions for future research on public investment and market development strategies for advanced technologies.

Figures (7)

• Figure 1: Sustainable competition diagram showing the relationship between industry-level direct government purchases, industry-level total costs, and the potential number of profitable firms. Shaded regions indicate the expected sustainable number of competitors under different system cost and government-derived revenues.
• Figure 2: Artist's concept of the Gateway's PPE and HALO elements in lunar orbit. The PPE is the rectangular structure to which solar panels are attached, while the HALO is the cylindrical structure with circular docking ports visible. Credit: NASA.
• Figure 3: Artist's concept of CSA's Canadarm3, an exterior robotic arm, on the exterior of Gateway. Credit: CSA.
• Figure 4: ESA's Columbus laboratory module attached to the Harmony module on the ISS. Credit: ESA.
• Figure 5: Sustainable competition diagram showing the relationship between industry-level direct government purchases, industry-level total costs, and the potential number of profitable firms for the crewed space stations example. Shaded regions indicate the expected sustainable number of competitors under different system cost and government-derived revenues.