Michael Kaufman
Each of you should give us your team's presentation. The rest of us will listen as investors.
Team 3 : Space Craft Systems
We were tasked to come up with something commercially that could be done with space craft. We came up with several options. We looked at the aggregation of secondary payloads, and refuel and re-supply space craft for large asset lifetime extension. We focused mainly on this one.
Sometimes you plan for a system to become obsolete due to lack of fuel or radiation damage, etc. If we could launch a $7M launch vehicle and a $7M spacecraft, we could probably do it. The idea is to make about a $20M profit. With 25 satellites up per year, you could make about $100M profit per year. Our plan looked at the costs of engineering, facilities, and getting our initial investments in upfront.
Team 1: Human Health/Telemedicine
Team 9: Gene
I won't go through the details of the technology again. The business cases are solid. The key point we came up with is that a lot of things make sense to do in space, so we played around with some numbers. We asked how cheap does it have to get before this makes sense, then we need to do a reality check. A reasonable payload in the 20-30 pounds range is doable for about $225K. We believe the market could bear that.
We don't know the economies of scale here. If we can buy more than one launch vehicle, what is the economy of scale? One of the problems is that I like small because it's easier, but economies of scale go the other way. For example, it's better to have a 747 than 100 Cessna 150's. If we can fill up the vehicles, what is the price point? The question is whether you can fly full fare, like first or second class, etc. At least we have the potential. COTS is working right now and moving us in the right direction. There's some real money behind that.
There is also the responsive space approach. Let's not forget the internationals out there. Russia is the place to go if you want a low cost launch right now. Some of the commercial folks looking at manned capabilities may also be something we need to take into account.
We were initially looking at free flight unmanned, then to a manned capability. If you can get the transportation, the science technology is there. You could get the business case to close.
Q: If we bang our heads on not having enough frequent flights, then we need to work on making them frequent enough. Make that the problem to solve. Is it time to divvy up the small things in space being paid for? Let's look at it as all being secondary. Can the government play a minimum cost role in making a call for aggregation and start putting those pieces together? There would have to be certain conditions of course, like no contamination of other payloads, etc. Let's put a test case out on the market.
A: I agree; I think we are near that tipping point. The proof is in the pudding. The government is helping on the supply side by priming the pump. They're killing us on the demand side. On one hand we're encouraging it, and killing it on the other hand. Hopefully, if we bring this to the right people's attention, we can make the case of what the government can do to make this happen.
Q: Did we do a reality check and ask people here who might be in a position of having a bit of money if the opportunity was there, would they do it? Unfortunately what you just described could be a limiting factor.
Comment: There are two pieces. One is that we will need a year to pull things out of the closet and dust it off. The government itself needs to sit down and chip in to pool together the things we want to do in space. There are things of great value, that if supported somehow, we can aggregate a pool of resources to fly enough times. We need to put the call out to government sponsored entities. If it's in the public interest, the government can pay for it, otherwise it would need to be a commercial provider. Let's blow the doors open and see what's out there. If we keep it over time, others will get ready. It will mean creating a consortia where we can pool resources.
Discussion
Who thinks they might be ready a year from now? Let's hear from folks in the room about that.
It's a minimum of two years for me.
The reality is that some of us are getting offers to fly with six months notice.
How many are ready to fly in an aggregated situation now, on a free flyer?
(Three hands are raised.)
How many in a year from now?
(Three hands are raised.)
How about a two-year timeframe?
(Four hands are raised.)
How far out do we have to go to get most in the air?
Is it that you don't have instruments or don't have the funds?
How many have hardware you'd like to fly in space that would be ready in two years?
(Three hands are raised.)
We've been thinking of all this for quite a while. There is clearly a role for the government here but can we get them to step up? There is also a role for the private sector to show the government there is interest. How does the public, private, non-profit, and universities work together to make this happen?
There is another corollary to the question. How many who raised their hands have 10 or more research investigations and development activities they would do if money was not an object?
(Four raise their hands.)
If we put up 7-10,000 pounds, can you aggregate enough to do that size load?
Its very feasible, we'd need to go to work on it.
Team 2: Human Life Support
Team 4: Human Habitats / Advanced Materials
Most of you heard Jim's presentation in the first phase. The second question found us exploring different arenas. We got to the draft elevator speech level. Our initial approach was a lunar base that would be used for exploration and a commercial base. A fundamental part was that it would have a strong commercial baseline. We went down a pathway most likely to succeed.
We began with a lunar base and operations would be commercial. Who owns the lunar base? The options we looked at included how it would be built. We looked at three models. One was for NASA to build it, one was that a consortium of government or corporate entities built it, and the last was a commercially built habitat.
The government might guarantee a loan for a commercial company to build it. Given that, what will we do in the building process? We need input from the commercial side as to what we would do. How transferable will it be? We also looked at modularity and how it could grow in that way.
Our model for how this might be operated is similar to that of a mall. The anchor tenant would be NASA, both in exploration and science. There would be other tenants such as DOD, China, India, Russia, mining, tourism, and commercial science. Those are the markets. That's about as far as we got in our work.
Q: Did you have any preference as to which model you thought would be best? NASA is currently trying to commercialize some of its infrastructure. In you transition plan, how will NASA build it and then turn it over to somebody? The mall has to be user friendly.
A: We have a strong preference and that is to initially build it commercially.
Q: There is also a trailer park model. Know that NASA will take the first trailer and then bring up the trailers that have been modified by the next user.
Q: If you are going to rent to somebody, at some point in the future is it possible to setup a level where you can be bought out?
A: We didn't get that far in our work.
Comment: I want to reinforce the owner of the anchor tenancy model. With the contract of future services, one can borrow a lot of money. The banks are willing to loan you money since the government is perceived to have a good credit rating. There is a lot of power there.
Team 5: Imaging
Team 6: Communications
We looked at what we call "Tmely Google Earth, Moon, Mars". A Google system could look at things besides earth. The second option was to setup a communication utility in the solar system based on the theory that if it was there, it could be sold to users. The final things was a combination of both. The third thing is the use of high quality digital video systems. All that requires gigabits of communication to come back to earth.
The customers for the Google, Earth, Mars option are the usual suspects, e.g. emergency preparedness personnel, etc.
A lot of this requires more research in order to determine the size of the market, especially in the area of exploration. We looked at the wide usage for services such as agriculture, commodity marketeers, speculators, crop yields, and hedging the markets. It's difficult to determine a revenue stream at this time.
Government intervention, and eventually sponsorship would be required. The information would be purchased by business for use by consumers. Licensing data to business and covering the entry would need to be developed.
The size of market for space communication utilities is enormous and something that can be executed. So that's something that is feasible.
Discussion
Why would the government have to subsidize that?
We are able to Google for free though.
But I pay for advertising on Google.
Everything is shifting to local search. There is a competitive advantage for having the best local search. Your option one is completely commercially viable right now.
They have a database that's been collected over years.
Imagine the market being able to pinpoint an asteroid and be able to observe it. Information can give competitive advantage.
I think you are underestimating the competitive energy and the advantage competitors would give to have that capability.
It may not be feasible with today's parameters.
To your point, it would require an X number of flying vehicles, but Google is replicating "Internet in a Box" to give instant information. They already think this way so it's not a big leap to go one step further.
Everybody that came to our presentation added to our list. We expanded our charge to include more. We took a look at opportunities such as solar arrays and propellant sales. We identified several opportunities. Everybody is concerned with the viability of NASA as a customer. How do we mitigate the risks?
Solar arrays can be generated on earth and then sold to customers in space. The whole idea is to extend it to make something that provides a product in space that makes money in space. The application decided upon was a gigawatt of power on the surface of the moon. If you take space solar power just as a commodity, it is commercially purchased at $3000 per installed watt. That is very small amounts of power for large amounts of money. If you could get a cost advantage factor of four, the cost goes down and the profit goes up. You're talking about a good revenue of money.
One of the markets for this would be propellant production. We looked at propellant sales. Accessing propellant in lower orbits is $10K per kilogram. FOB the surface of the moon would be the other option. Getting a kilogram of propellant on the surface of the moon is $150K per kilogram.
We looked at the size of the market. What are the markets in terms of direct revenue? We also looked at the R&D costs. Then we got into all sorts of return models. We looked at simple paybacks. How long does it take to pay back your investment? It turns out to be about five years with LEO and seven years with the moon. Twenty percent goes to the investors. The next issue was whether the science was proven. Most of the stuff is there or getting there.
You need a good management team to do all this. We also looked at market barriers and found that we are sometimes our own worst enemy. To be successful, LEO needs five geo transfers. The lunar model needs one transfer. Those were the market demands we saw.
How do we mitigate the risks? The issue is that one thing you need is a guaranteed purchase plan. Performance bonds, business development banks, and Title IX loans all need to be considered.
There was a question around whether the commercial entity fails to perform. That's what insurance is for.
Q: If the government did choose and was legally able to do an advance purchase, how much specificity do you need?
A: First of all, the DOD is able to do it. The government agrees 9 years in advance for the development contract for aircraft carriers. NASA has said it can't contract. That's not true. The government can do what it wants to do; its a matter of desire. There is a balance of risks and rewards.
Q: Does the business have to purchase insurance?
A: That's the purpose of Title IX loans. The same is true in government guaranteed loans.
Comment: The largest cruise ship just launched was contracted for three years and the target was met. Why can't the government do the same with aircraft carriers?
The problem has been that NASA has decided it wants to be in the infrastructure business and not the exploration business. It owns everything and that's not affordable. It needs to get out of that business. We have to help NASA understand that "less is more" infrastructure wise.
We identified things from the earlier sheets that folks felt the government needed to do. Then we categorized them as to what, when, and the right levels. We came up with what we felt the role of government should be.
The government should provide some infrastructure; with emphasis on the word "some".
Discussion
What does coordination mean?
It means government to government, states, organization to organization, industry to industry. Government has a limited number of things it should do. They should also provide for the common good.
So you don't mean they should coordinate the prices?
I don't know. We just developed an overall objective.
The more adjectives put in , the more complex it becomes.
We were challenged to put together a first draft.
The appropriate level is an important factor. The government needs to learn how to back off of some of this.
My concern is if the government coordinates too much, they get too expansive and start regulating prices.
The way it's written is a framework that leads to the third point you reported. The ultimate goal is to create a commercially sustainable activity.
Its like the three laws of robotics.
I would like to see the space community and write a detailed letter on how to tell the government how to do it and not have them tell us how to do it.
Michael Kaufman
We now have a surprise presentation. Jay has worked on modeling some of what he heard from your work so far.
This is a synthesis model of what you talked about today. There are three main function:, supply, demand, and investment. We need some function that will aggregate. We also have various sources of investment. How do we aggregate them into products and programs.
In the middle is a marketplace for information exchange that looks for opportunities for output. All this is integrated through some function, such as finance. The marketplace would allow different combinations.
Again, this is a functional model. Defining a model could be some of our work tomorrow.