SpaceX undercut ULA rocket launch pricing by 40 percent: U.S. Air Force
reuters.com
reuters.com
I could see even ULA's pricing pendulum swing all the other way: they could start bidding for contracts at a loss, using their other business sectors to prop up the space division until they drive SpaceX out of business.
Exciting times...
I do. In the '90s I was working for a company that was used to bidding cost plus contracts when DoD contracts pretty much dried up as a result of the collapse of the Soviet Union. Management tried very hard to realign the company to compete in the commercial sector and failed miserably.
Changing the focus of a large organization like that from performance to cost is extremely difficult. Your people aren't organized properly, your finances aren't organized properly, and you have a cost+ culture that's hard to kick.
A much cheaper and safer strategy is to get Congress to wire defense contracts for you. ULA has manufacturing all over the place. What that means is job losses at ULA will be politically unpalatable. Beyond that, a logical argument can be made against putting all the national space eggs in one basket.
If that argument actually carried any weight, then ULA wouldn't exist, but Martin, McDonnel Douglas Aerospace, and GD Convair would. That is, the DoD and the defense companies trot out any arguments they feel like, and hope that Congress accepts them.
I concur on your analysis of companies that are fat and happy bidding and working on DoD contracts. It's really, really hard to turn those companies around.
Times have changed. I think Congress may have seen the error of its ways on this one.
Individual congresspeople might see why a past decision did or did not work out well in the long run. That's very different from seeing whether the same decision is politically expedient in the present moment. Nor does it necessarily imply that Congress as a whole is even capable of forming stable memories that can reliably retain that sort of knowledge.
Either that or Congress realized they can't sweep under the rug how much taxpayer money they could be saving.
ULA is safe for a while due to the DoD's requirement that they keep two domestic methods for space access alive.
Previously this was met with the combination of ULA's Atlas V and Delta IV. Now it'll be the F9 and Atlas V, with the expensive Delta IV being phased out (it's still occasionally needed as it's the largest booster still in operation worldwide).
However ULA's in trouble if another SpaceX shows up. I assume that's why they're working so closely with Blue Origin, better to capture that player now and get a cheap engine provider out of it.
Another input: cost isn't everything; the Atlas V has never lost a payload, while the F9 has. An extra $40m doesn't look like much if your payload is a half billion dollars, for example.
You can't really "capture" a billionaire's business.
The other issue is capacity. Even if ULA dramatically cut their costs to drive SpaceX out of business, that will stimulate a huge surge in demand for launches. To drive anyone out of business, ULA would have to meet all of that demand on their own. I don't believe that's possible for them, they just don't have the capability to ramp up capacity fast enough, so SpaceX and other operators would pick up the excess business anyway.
If only that were true. It does happen in many markets, but not currently in the space market. Space is still in the early-stage / chicken-and-egg mode. A bit of simple value chain analysis shows why.
TL;DR: we may be closer than I think to the space business moving into traditional economics, but even then it's probably decades out.
There are three disjoint space markets: - military: largely price insensitive; volume unknown to me but not enormous; has specialized needs so a lot of it couldn't be satisfied by COTS launch systems - science: some of which (earth sensing) can use COTS, the rest is low volume, has non-commercial requirements (e.g. non-LEO) and often has weird timing constraints depending on what the orrery says. - commercial, which is what we all want to explode in volume! Today this is 100% LEO.
Science is largely the space side of NASA and I personally am convinced congress only funds in order to provide enough economic volume that the contractors are available to support the military. I.e. a fig leaf for the military just like the DoE (whose hands are all over space science as well).
So commercial: the chicken and egg problem the compound of two (used to be three, see below) issues: launches are rare and expensive, so satellites are few and far between, which makes them expensive, which doesn't encourage volume, which doesn't encourage launch capacity development, which keeps them expensive... This is one of the reasons why previous private efforts (e.g. Rotary Rocket) have foundered. Despite what my libertarian friends say, it's almost impossible to break out of this trap without government incentive; the activation energy is too high.
Now almost is not the same as 100% and this is where I'd like to believe and agree with you. And I do agree, except the time base I believe in is too slow to support the phrase "huge surge in demand"
One thing that has been great is the folie à deux on the part of billionaires Bezos and Musk (I believe that SpaceX and Zip2 are the only companies Musk actually founded, right?) has allowed ego to try to break that cycle for LEO applications. Unless Google or Apple or Amazon can start pumping out satellites for internal use in high volume the overall market will grow slowly (who else is likely to buy a lot of satellites? I'm not sure). And even so that effort will take time to ramp up. If not...hard to see who will take up the slack.
I also look forward to non-LEO applications, like mining. It has its own bootstrap problem.
However my main point is still true: today commercial and non-commercial applications have quite different needs and thus different economic drivers.
(I used to work for Lockheed, although not in the missiles and space business. I wouldn't hold my breath expecting ULA to match SpaceX's prices.)
That would be blatantly anticompetitive dumping, by the textbook definition.
You wanted that to be blue ok, that's an extra 2 million.
An alternate end-game would be ULA stringing together a few contract wins, pushing SpaceX to the brink, and then ol' Elon gets a nice offer from Boeing and Lockheed...
I also wonder just how much of the technology and the pace of development we're seeing from SpaceX hasn't originated from the military themselves.
[1] http://arstechnica.com/information-technology/2016/03/f-35-radar-system-has-bug-that-requires-hard-reboot-in-flight/Not to mention the supply of those engines is highly predicated on maintaining a solid relationship with Russia for what that's worth.
It's certainly not obviously more efficient or quicker reuse, it's likely to be slower and far more costly if they actually do manage it, so saying it is more efficient is just a way for ULA to try to sound like they are still a contender, even out their launches are still significantly more expensive and they haven't even tried to reuse engines.
Also, they're at totally different places along the technological readiness curve. They're proposing a theoretical concept, SpaceX has already recovered two first stages. Even if their parachute concept was theoretically superior (which I don't think it is) by the time they got it working, SpaceX would have years of operational experience with hoverslam.
THAT has to end. Then let's see them compete.
Remove that subsidy and they implode instantaneously. Their cost per launch would be just about the highest in the world.
I'm in for $999M
"Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and finance the ambitious research projects that firms locked in competition can't dream of."
http://www.wsj.com/articles/peter-thiel-competition-is-for-l...
Put simply, monopolies do have greater capacity to innovate. When you're stuck in brutal competition, it's hard to funnel money into research which might not pay off for decades—your competition might have driven you out of business by that point.
On the other hand, the allure of monopoly profits is hard to ignore. It's tempting to simply funnel the profits into shareholder pockets and that's the approach investors will generally favor. For any middling CEO, it's the path of least resistance.
This is why founder-controlled monopolies (Google, Facebook, Amazon, etc.) are such a potent force. They have the incentive to preserve the companies long-term legacy (it's their personal legacy as well) through ambitions projects while also having the credibility and power to resist investor preferences for short-term profits.
I am not necessarily a fan of monopolies, but I think we owe it to ourselves to understand the tradeoffs and consider alternatives. E.g. how do you do basic research if there is so aggressive competition and shareholder look only 3 months ahead.
It is also worth nothing that the case of ULA isn't necessarily a case of merely monopoly but also how how that monopoly works. E.g. being a monopoly shouldn't require a cost plus contract. Secondly GM and the other big three are certainly not monopolies but have not proven any more capable than ULA in competing with Tesla in creating an electric car.
SpaceX is beating lots of other rocket companies which aren't necessarily monopolies. I think it is easy to overstate how bad ULA is when perhaps it is really about how good SpaceX is ;-)
Also remember the Russians also operated government monopolies for rocket building and yet managed to build considerably cheaper rockets than the Americans. I think there is a lot more to this issue than whether it is prive/public or a monopoly.
I.e. both of which provided by a de-facto ultimate monopoly which can afford "luxuries" like basic research because they don't have to worry it won't pay off next quarter.
> (...) and venture capital.
I want to see VC-sponsored ambitious research projects. VC-money-induced thinking is very short term.
Isn't that exactly what YC research is?
That analogy is not applicable here because PT is referring to businesses who capture market by innovation and growth and become monopolies. I am reasonably sure PT is not referring to monopolies like USPS/AT&T/COMCAST/Cable Companies who have become monopolies using government's coercive power.
If you are running a business where your only customer is government and you are a monopoly I don't think anyone cares about innovation much. I would love to see counter examples if you have any.
This means little reinvestment, little customer service, and a product/service only good enough to keep the conservative party from admitting that sometimes a little regulation is necessary (aka just about never).
There's also a big difference between natural monopolies (like electricity or gas distribution networks) and IP monopolies. Monopolies that are established by providing a vastly superior product require continuous R&D investment to maintain and natural monopolies do not.
With an arguable rare exception being AT&T from the early 20th century up until about ~1980 perhaps, nurturing within it the renowed Bell Labs and its predecessor(s).
There are of course exceptions - like Elon, who has and for whom the profitability of the company is only a secondary, supporting concern.
Most of us on here work in software - how many times have we seen tech companies get their products and services deep inside an organization and milk it for years once they have leverage. Once it gets too bad, alternatives begin to come in to the marketplace. These are usually cheaper/better.
But still the practice happens over and over again. This means that those years of milking it is worth it.
But due to collusion, sometime-insufficient regulation (e.g., ad networks that can and do deliver malware), sometime-overbearing regulation (e.g., software patents), and ... well ... the rest of the real world, Adam Smith market economics is exceedingly reductionist. It works in the microcosm. Until you take into account that no economic entity or system is fully enclosed.
For example: has Blackboard yet been toppled, or are they still suing and/or acquiring any potential competitor via its vast patent portfolio, all the while being the absolute worst solution to its problem possible?
I wonder if we could create a simple little Web site people could post markets with virtual monopolies that that would like to see disrupted. It could act as an ideas board for entrepreneurs looking for fertile start-up areas.
It could be a simple post, but with the opportunity to flesh it out out with information on barriers to entry etc,potential market size etc.
You could post about blackboard. I could post about TES.com/jobs which has a virtual monopoly on advertising jobs in the UK teachers market, despite appalling service and ludicrous prices.
ULA is working on reusability of at least the engine in its vulcan rockets that will replace Atlas and Delta in 2019:
https://spaceflightnow.com/2015/04/13/ula-unveils-its-future...
the plan is for vulcan to cost about 50% of an atlas V... so about 80-100m
My guess is the market friction is political. ISRO (the Indian space agency) has been cheaper than ULA for years, but my suspicion is that the USA wouldn't consider using them for political reasons.
This is a great move for SpaceX and while painful for ULA the results of solid competition has usually been better product from all suppliers. Let's hope that helps make for better rockets.
Is anyone else here confused by how exactly cutting 1/4 of their workforce will make them more competitive? I get being lean and all that, but still...
It's like when IBM sold their consumer PC and laptop business to Lenovo. The analysis was that the consumer business was essentially commoditised and IBMs core value proposition is in high-value-added servers and services -- the laptops were a distraction.
(In reality, IBMs core value proposition is being IBM, so they could probably have carried on selling ridiculously marked up ThinkPads to the enterprise and government market)
I wonder how the Air Force addressed this issue. Perhaps the cost of failure is less than the premium for reliability; perhaps they evaluated reliability based on something other than the track records (e.g., an engineering review); and of course it's political - McCain, Chair of the Senate Armed Services Committee, is reputedly a strong advocate for SpaceX.
CRS-7 was certainly a blow to SpaceX. There's no sugar-coating that, but there's no such thing as certainty in space. Even with the stellar Atlas V record, there's still risk.
Also, for this mission, no justification needed to be made, as ULA did not submit a bid. And yes, Falcon 9 went through a lengthy certification process.
But these GPS satellites are only in the $100m dollar range according to the internet so it just doesn't make sense to pay an extra $50m to go from 97% reliability to 99.7%.
The only problem would be a long delay....
Google Terra Bella (aka Skybox) uses SmallSat (~100 Kg) imaging satellites, and the NRO could use a similar for priority uses where a launch failure wouldn't be as painful as loosing a $1Bn spy satellite. A SmallSat wouldn't be as capable as the larger ones, but has advantages.
The purpose of the EELV program is more about assured access to launch vehicles to get to space, than individual missions being near 100% success.
Insurance doesn't reduce the costs of (whatever event you're insuring), it just evens them out. Instead of paying for (e.g.) 1 failure every 25 launches, you pay for 0.04 failures on every launch (plus the insurance company's profit).
So the payloads' costs still apply.
"I guess the question I'm asked the most often is: "When you were sitting in that capsule listening to the count-down, how did you feel?" Well, the answer to that one is easy. I felt exactly how you would feel if you were getting ready to launch and knew you were sitting on top of two million parts -- all built by the lowest bidder on a government contract."
Cheapest != worst, see SpaceX.
Otherwise, yes.
Not IMHO: The launch is a single, controlled, predictable task; they can choose their exact launch time and location for optimal performance; have extensive quality control checks and engineering, a room full of support engineers, etc; the exact route and timing of the launch is carefully planned ahead of time, etc.
The plane has to handle every contingency of war: Take off from wherever and whenever needed, fly anywhere, refuel in mid-air, dodge enemies trying to kill it (can SpaceX or ULA do that?), destroy enemies trying to avoid it, return safely home, etc.
And all of those problems are (supposedly) solved by the time the plane is being manufactured.
Your argument regards R&D costs, not manufacturing costs.
I thought dogfighting was nolonger required in this day and age?
You might be thinking of the F-111, which was supposed to be all things to all services. That was the 1960s. Or maybe the failed A-12, which was supposed to be an attack plane for all services.
But you're correct, unitary, multi-role fighters have a bad history.
Multirole capability is primarily a function of the weapons an aircraft can employ. This wasn't true in the 70s when targeting pods were binoculars and effective employment of aircraft in strike roles required decent performance in low-and-slow flight regimes, but we've been living with pods and PGMs coming out of our ears for 25 years now. Design tradeoffs for multiroles today are primarily those of cost and maintainability. You can pay out the ears and get larger twin-engine multiroles that strain logistics and wallets, opt for a single-engine F-16alike multirole that'll do everything nearly as well except for flying really high and really fast, or inexplicably go Eurocanard to pay F-22 prices for sub F-35 capabilities. Anyway, the point is that it's next to impossible not to make a multirole these days even if you're trying; if you can employ weapons with your jet, you're multirole.
The F-5E/F Tiger [0] was one of the most under appreciated fighters on the market in the 70s and early 80s. The was limited in A/A victories in real combat because of lack of opportunities, although successfully used at TOPGUN and FWS at a low operating cost. Although marketed as a LWF, The F-5 was actually a multi-role aircraft, and used in combat as a strike aircraft.
IMO the F/A-50 [1] is the most under-appreciated advanced 4th gen fighter on market. At around $30m its half the cost of a new F-16, although a refurbished F-16 is viable for budget constrained Air Forces.
Similarly, the A-12 was also a Navy program, not a joint project. The Air Force considered buying it (had it been funded to completion by the Navy) as a replacement for the F-111, but this consideration was largely superficial, and they had little to no input into it's design.
You're thinking of the first generation of what became the SR-71, which was made for the CIA, and used a different numbering scheme: https://en.wikipedia.org/wiki/Lockheed_A-12
Surely they must have had some idea what their competition would charge from historical bids, so why not come in at a 30% or even 20% discount?
Also, when they publish their prices to normal customers (http://www.spacex.com/about/capabilities), it would look bad if the premium they charge the government for additional costs such as security was too high.
Even as it is, the Falcon 9 and PSLV price per kg to LEO are pretty much the same with newer Falcon 9 winning out slightly.
If I have seen further, it is by standing on the shoulders of giants.