The Accidental Monopoly

Rocket Lab had been on an upwards trajectory for the first eight and a half months of the year. The company conducted its first Electron launches from Launch Complex 2 on Wallops Island, Virginia, and flew a new suborbital version of the rocket, called HASTE, to tap into the hypersonics testing market. The company was planning to fly up to 15 Electrons in 2023, compared to nine in 2022. It also made strides toward its goal of reusing the Electron first stage, such as flying a reused Rutherford engine.

But, as many in the launch industry often say, you’re only as good as your most recent launch. On Sept. 19, those plans came plummeting back to Earth — literally.

On that day, an Electron lifted off from Launch Complex 1 in New Zealand, carrying the second in a series of Acadia radar imaging satellites for Capella Space. The first stage appeared to work as planned, but video from the rocket was lost moments after stage separation. Telemetry displayed on the launch webcast showed the rocket’s speed decreasing, suggesting the upper stage’s single engine was not working.

About 45 seconds after stage separation, the launch director delivered the bad news: “All stations, we have experienced an anomaly.”

The company has provided few details about exactly what went wrong. “We’ll find it, fix it and be back on the pad quickly,” Peter Beck, chief executive of Rocket Lab, posted on social media a few hours after the failure.

Rocket Lab had emerged as the leader of the Western small launch market as others struggled. Some companies suffered launch failures, while others faced financial setbacks, most notably Virgin Orbit, which went bankrupt this spring.

Those technical and financial problems left developers of small satellites with few options to launch. The customer that was going to launch next on Electron after Capella Space was Japanese radar imaging company iQPS, which switched to Rocket Lab earlier this year after Virgin Orbit’s failure: it had been next to fly on LauncherOne when Virgin went under. Northstar Earth and Space, a Canadian company developing a constellation of satellites to collect space situational awareness data, had also switched to Rocket Lab after Virgin Orbit’s failure, with its satellites expected to launch on Electron before the end of the year.

The lack of launch options has become frustrating to some companies. “We have a duopoly, right? It’s just two of those guys,” said John Serafini, chief executive of HawkEye 360, a company that operates a constellation to perform radio-frequency geolocation. The company has launched its satellites both on Electrons and on SpaceX Transporter rideshare missions.

He had no complaints about the performance of either company but lamented the lack of options from others. “Either by bankruptcy or by delays, so many launch companies just haven’t gotten there yet and haven’t demonstrated repeatable success that will give us confidence to put our satellites on those launch options,” he said in an interview during World Satellite Business Week a week before the Electron failure.

And now, at least temporarily, that duopoly has become a monopoly.

RocketLab’s remaining 2023 manifest before Sept. 19 failure

“SpaceX is probably the monopolist right now”

Even before the Rocket Lab failure, people were tossing around the word “monopoly” when it came to SpaceX. It had become increasingly clear that companies needing to launch their satellites in the near future had few options beyond SpaceX, particularly those spacecraft too large to launch on a small vehicle like Electron, as other launch providers stumbled.

SpaceX’s dominance in the launch market became an unofficial theme of World Satellite Business Week, starting with the very first panel. “Having such a dominant launch service provider is probably not healthy in general for the commercial prospects of the industry,” said Vikram Nidamaluri, managing director of the telecom, media, and entertainment group at investment banking firm Lazard. “No one wants a monopoly choking off one point of the value chain.”

He suggested that increased government investment might be needed to bolster competition in the launch market. “I think critical and continued increases in government budgets focused on space and communications are going to be essential to pushing forward technologies,” he said, “and maybe even enabling a second or third launch company.”

One of SpaceX’s customers agreed that the company effectively had a monopoly on the market. “Let’s face it, SpaceX is probably the monopolist right now,” said Luca Rossettini, chief executive of D-Orbit, a company that has flown several orbital transfer vehicles carrying smallsats and hosted payloads on SpaceX Transporter missions.

That was, he added, no fault of SpaceX itself. “Not because they wanted to, but because of many other situations that created this scenario.”

Even if SpaceX has a commercial launch monopoly, a separate question is whether the company is acting like a monopolist, using its market power in an anti-competitive manner. Answers to that depend on where other companies sit in the market.

Some small launch companies argue that SpaceX has acted anti-competitively in the market by pricing its Transporter launches so low that their vehicles can’t compete. 

“SpaceX came with these Transporter missions, which have been really disrupting,” said Marino Fragnito, senior vice president of the Vega business unit at Arianespace. They have been a boon for smallsat developers, he acknowledged, offering low-cost access to space. “But at the same time, they have created a big problem in terms of the business case for all of the other players.”

He accused SpaceX of, in effect, predatory pricing, willing to lose money on Transporter missions to drive out competition. He noted that past Vega smallsat rideshare missions sold payloads at $25,000 per kilogram, whereas SpaceX has sold Transporter launches for one-fifth that price. “It’s crazy.”

“I think the level of pricing they introduced was not sustainable,” Fragnito concluded, suggesting it led to the demise of Virgin Orbit and financial problems at other companies. “Launcher companies could not live with that level of pricing.”

Customers of SpaceX, though, say they are satisfied with the company’s launch pricing and availability. That has included those competing with SpaceX’s Starlink broadband constellation, who have increasingly turned to SpaceX for launch given the lack of near-term options.

An example is Telesat, which announced on the first day of the conference, Sept. 11, that it had signed a contract with SpaceX for 14 Falcon 9 launches of its Lightspeed constellation in 2026 and 2027. Telesat had previously announced contracts with Blue Origin and Relativity Space for launches of Lightspeed satellites.

“Given the dedication and professionalism of the SpaceX team, and their outstanding track record of reliability and demonstrated high launch cadence, I have the utmost confidence that they will be an outstanding partner in helping us bring Telesat Lightspeed into service in a timely and low-risk manner,” Dan Goldberg, chief executive of Telesat, said in a statement about the contract.

The Telesat deal, as well as recent contracts to launch satellites for Globalstar and Rivada Space Networks, were evidence that, even if SpaceX had a launch monopoly, it was not acting like a monopolist, argued a company executive.

“We’ve proven that we’re a launch company first. We’re here to provide launches,” said Tom Ochinero, vice president of commercial sales at SpaceX. While the company’s launch manifest is dominated by Starlink, “they’ve proven to move out of the way as needed sometimes” to free up launches for other customers.

“I’m 100% here to say I’m not super worried about this,” he said of concerns SpaceX held a monopoly.

One major commercial satellite constellation under development that has avoided SpaceX is Amazon’s Project Kuiper, which announced contracts a year and a half ago with Arianespace, Blue Origin and United Launch Alliance to launch its 3,236-satellite constellation. However, those contracts involve vehicles that have, so far, yet to perform a single launch.

Amazon is now facing a shareholder lawsuit because of those launch contracts. The suit, filed in a Delaware court in August by a Cleveland-based pension fund that owns Amazon stock, argued that Amazon’s board failed to perform proper due diligence in approving those launch contracts, in part because Amazon, founded by Jeff Bezos, was funding Blue Origin, also owned by Jeff Bezos.

The suit also claims that the board failed to consider SpaceX for launching Kuiper satellites. “Despite being the launch provider with the most proven track record and the lowest prices in the industry, SpaceX was seemingly not considered by Amazon,” the suit states, which “likely committed Amazon to spending hundreds of millions of dollars more than it would have otherwise had to.”

Restoring competition

Amazon has said those suit’s claims are without merit. Naveen Kachroo, head of product management and business development for Project Kuiper at Amazon, offered no concerns at the conference about the ability of Arianespace, Blue Origin and ULA to meet a July 2026 FCC deadline of launching half its constellation.

Those launch companies also said they were ramping up production to meet the needs of Kuiper and other customers, even if the first launches of their vehicles — once planned for 2020 — remained uncertain. Tory Bruno, chief executive of ULA, was the most specific, offering a December launch date for the inaugural Vulcan Centaur after having corrected a problem with the Centaur upper stage discovered in a test this spring.

The first Ariane 6 launch is now planned for some time in 2024, but Stéphane Israël, chief executive of Arianespace, said a more specific date would come only after a long-duration static-fire test of the Ariane 6 core stage in French Guiana, then scheduled for Oct. 3.

However, ESA announced Sept. 21 that test would be delayed because of a problem with the thrust vector control system in the rocket. The agency did not announce a new date for the test.

Jarrett Jones, senior vice president for New Glenn at Blue Origin, was also vague about a first launch of New Glenn other than that the company planned “multiple” launches of the vehicle next year.

“We intend to meet our contractual requirements in ’24,” he said. Blue Origin’s New Glenn contracts include one with NASA for the launch of the ESCAPADE Mars smallsat mission, which project officials have previously said is planned for August 2024.

It’s clear, though, that there is increasing urgency among those launch companies to get flying. Blue Origin announced Sept. 25 that its chief executive, Bob Smith, was stepping down after six years, to be replaced by Dave Limp, an Amazon executive whose portfolio included Project Kuiper. “Dave has an outstanding sense of urgency, brings energy to everything, and helps teams move very fast,” Bezos said in a message announcing the change.

Other companies are planning to offer vehicles against SpaceX’s Falcon 9 and Falcon Heavy. The first H3 rocket failed in March, but Iwao Igarashi, vice president and general manager of Mitsubishi Heavy Industries, said at the conference he expected the rocket to return to flight by the end of the year, having incorporated corrective actions demonstrated with a successful H-2A launch in early September.

Rocket Lab is also seeking to compete directly with SpaceX with its larger Neutron rocket. Adam Spice, chief financial officer of the company, said at World Satellite Business Week that the company was still targeting a first launch of Neutron in late 2024.

“The market really does need another high-volume-capable, cost-effective medium launch option,” he said, citing the delays in vehicles from Arianespace, Blue Origin and ULA. “We hope to be the one that provides that incremental lift capability to the market.”

Rocket Lab, though, must first overcome its near-term Electron problem. That rocket has now failed three times since July 2020, all involving its upper stage, raising questions about its reliability as well as the company’s ability to ramp up production.

One analyst played down the effects of the Electron failure on the company. “Investors appreciate the fact that Rocket Lab is delivering on its core service by launching regularly, while also working to expand its capabilities through reusability, a larger vehicle and spacecraft manufacturing,” said Micah Walter-Range, president of space consulting firm Caelus Partners.

“As long as the company continues to show progress on these fronts, a single failure after a string of successes is unlikely to be catastrophic from a market perspective,” he concluded.

The risks of a single failure are magnified for a dominant launch provider like SpaceX. “A fleet-wide disruption to the Falcon 9 fleet for an issue of some type will have a big ripple effect,” warned John Rood, chief executive of Momentus, which has flown its tugs on Transporter missions. While he said he admired SpaceX’s reliability record, “we’ve all been in the space industry for a while. Things will happen. This will not be perfect.”

Customers like HawkEye 360’s Serafini are also looking for more competition in the small launch market. “We’re eager for companies that have been nearly there for several years to get there, so we can have more options and at least drive down the pricing for some of these other existing options.”

ULA’s Bruno emphasized that point on a panel with SpaceX’s Ochinero. “As much, Tom, as I appreciate the sentiment that you will be a benevolent monopoly, I don’t think you’re a monopoly,” he said. “I don’t think it’s our plan for you to become a monopoly.”

This article originally ran in the October issue of SpaceNews magazine.

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