There is Not Such Thing as Commercial Space
Robot dogs and a trillion-dollar market that is just not there
I live on the fourth floor with no elevator in suburban Helsinki. Every time I come back from the supermarket with 20 kgs worth of groceries in two or three bags, the same thought crosses my mind as I curse my existence: wouldn’t it be nice to own one of those robotic dogs that could just take the bags for me upstairs so I could chill all the way up with free hands? A quick googling tells me Spot—such is the name of the robot I am referring to—costs around 75,000 dollars.
Another thought comes right after: why is robotics still such an unaffordable technology for the masses? Why aren’t robots ubiquitous like people in the 1950s (wrongly) predicted they would be, carrying our groceries, walking our dogs, or changing our flat tires?
The rudimentary economist that lives in me tries to explain the conundrum—in a rather simplistic manner—by means of this self-reinforcing loop:
There is low consumer demand because most people aren’t willing to pay thousands of dollars for a thing that does tasks they can do themselves.
Without mass production, costs stay high.
Go to step 1.
Technologies only become mainstream when they cross that threshold where they are both significantly more convenient (in terms of complexity, ease of use, intuitiveness, etc) and financially more attractive compared to existing solutions. Both conditions are necessary; only one is not enough. We use stuff if it solves a pressing problem AND makes sense to use it, all other things considered.
We use escalators and elevators without thinking twice because, while faced with the challenge of having to spend our own energy climbing floors, we would rather use the power of an electric motor to our advantage, but under certain conditions: IF it is for free, and IF using it is simple enough not to make our life miserable in the process. Otherwise, we would stick to what we know (climbing the damn stairs ourselves). Ask for money to let people take an escalator and everybody will simply leg it. Ask people to solve a complex riddle before allowing them to take an elevator and people will be like “fuck this, I’ll take the stairs”.
Cars became massively adopted when the hassle of keeping a horse alive, feeding it, cleaning its waste, and dealing with their dicey temper stopped making sense compared to buying and owning a 4-wheel metallic gizmo.
Where am I going with all this? Space technology is still far deep in the “robot dog” scenario, and it all indicates it will stay there for a long time. Most space technology remains away from being commercially attractive for the masses, down below the threshold where using a satellite to do something useful for us mortals in our everyday lives in exchange for our quid would make sense. Thus, it is unsurprising that a large portion of the currently flying satellites make zero money while in orbit, providing instead a host of public services that are 'free': global positioning, weather forecasting, and imagery used for feeding free things like Google Earth and the maps apps in our smartphones. Charging money for all that would feel like charging for using escalators at the mall. And I say this as someone who’s worked in space for nearly 16 years and still pays the bills thanks to it. It is even more frustrating to see this lack of commercial edge from within. And with “commercial”, I strictly mean zero-government, zero-military, and zero-direct-or-indirect subsidies involved.
It should then be no surprise that LEO Earth Observation players are struggling to find substantial markets for their data and are rather trying to find alternative streams by selling systems (“missions”), hardware, and components. There is no B2C and no substantial B2B market for EO data worth paying for, except for governmental and military demand for specific scenarios. Every time I have heard someone explaining how EO data could help solve X or Y problem, there was always a simpler way of doing it at hand. I remember rolling my eyes when hearing people describing the overused “parking lot” use case, where you could “monitor from space a supermarket parking lot and quantitatively assess business activity vs time”. I mean, sure, but can’t you just use some other less complex, cheaper technology like cameras or even inductive sensors and some IoT magic to detect cars and just feed it to a database? Of course you can, and that’s why no one is really paying for that service to be done from beyond the Kárman line.
In the way things work, EO companies should just release all their data for free (while observing national security concerns) and double down on alternative ways of making money; they have more chances of making money while the bird is sitting on the ground than once it reaches orbit.
Every time space has potentially sparked a massive market, it’s been bonked back to the niche. See dish TV. Isn’t that a mass market after all? Well, it was for a while (although calling it “massive” is arguable), until consumer habits evolved and streaming services rendered it obsolete. Once high-speed internet access improved globally, it made no sense anymore to continue using a service that would go to shits IF IT RAINED.
Is Starlink or any other LEO broadband constellation for that matter coming to prove me wrong and create a massive commercial market?
Starlink appears as the most “commercial” offering out there today involving actually flying satellites, but won’t have it easy. First, a problem with these constellations is that a large percentage of the capacity is wasted on areas without customers, so it runs with the disadvantage cities only cover a boring 2% of our planet’s surface1. Second, if you live in a city and you have access to ground-based broadband connectivity services, why would you choose connectivity from a choreography of radiation-delicate flying cans? For free, sure why not? For money, and not for small money, no fucking way, thank you very much I will continue supporting my local church and its holy 5G antennas.
Starlink is an interesting product nonetheless. I mean, it’s good that something space-related looks appealing and well-thought-out for once. Will it be massive? It might at least make a profit, which would be a dramatic difference compared to all the other similar alternatives trying the same that will inevitably go belly up. But it will surely struggle to break the “low demand/high costs” loop and will have to dodge the inescapable fact that satellite applications are mostly reserved for niche solutions that just can't be served otherwise. Needless to say, we are going to see a calibrating factor we haven’t seen yet from the constellation size side of things where, beyond a certain level, space traffic and pollution will become a physical limiting factor and put a ceiling to their scaling.
In “The Trouble With Trillions” episode of the Simpsons, Homer screws up filing his tax returns and the government arrests him for tax fraud. To avoid prison, Homer agrees to help Agent Johnson of the FBI, who reveals to Homer that in 1945, President Harry S. Truman printed a one trillion-dollar bill to help reconstruct post-war Western Europe and enlisted Montgomery Burns to transport the bill. However, it never arrived, and the FBI suspects Burns still has it with him and wants Homer’s help. Then, Agent Johnson throws a comment that I have always found so hilariously illustrative for describing the space industry’s constant chase for that multi-billion-dollar market rainbow that just isn’t there despite what all those hyping reports from dubious research firms consistently try to trick us into believing:
We believe Burns still has that bill somewhere in his house. But all we've ascertained from satellite photos is that it's not on the roof.
https://ourworldindata.org/how-urban-is-the-world