Plain Text: A Small Step For Private Space Travel

Burt Rutan and his team at Scaled Composites did it once again this morning, sending the rocket-propelled glider SpaceShipOne 63 miles above earth, into the nether regions of the atmosphere known as suborbital space. Despite a few tense moments--the craft spun uncontrollably on ascent--pilot Mike Melvill wrestled back control and accomplished the first of two flights necessary to win the $10 million dollar Ansari X Prize. (The second qualifying flight is tentatively planned for Monday but may be delayed while Rutan reviews hitches with the flights.)

But let us not delude ourselves: today's flight was no giant leap for mankind, but rather another small step for American Mojave Aerospace Ventures, the company created by Microsoft billionaire Paul Allen to fund Rutan's space efforts and commercialize his technology. The X Prize was founded in 1995 not only to challenge rocket scientists around the world and draw attention to the thrill of manned space flight but also to jump-start investment and competition in a new private space-tourism industry. So far, the prize has only spurred one legitimate company in such a business. Earlier this week, airline mogul Richard Branson announced plans to build a larger version of Rutan's spacecraft for a new, geekily named company, Virgin Galactic. Branson pegged ticket prices at $208,000 and said he hoped to mint 3,000 new astronauts within five years, beginning in 2007. "Virgin Galactic will be run as a business, but a business with the sole purpose of making space travel more and more affordable," Branson said at a London press conference.

With those prices, Branson will be flying to truly uncharted altitudes. Market research shows there is healthy demand for space joyrides, but only at a lower cost. In 2002, the research firm Futron Corp. commissioned a Zogby International poll of 450 affluent Americans and found 54 percent willing to pony up for a space trip, but only when tickets get below $100,000. Another American company, Space Adventures, has been taking reservations for a few years, assuming it will one day partner with a spaceship manufacturer. It says it has 100 reservations for suborbital flights at $98,000 each. Virgin Galactic, without even a plane to its name, already looks expensive. Perhaps Branson and company will serve complimentary meals and free beverages on the three-hour flights.

This is why a healthy new space-tourism industry needs not only a dominant company but also competition, and lots of it. But despite Rutan's repeated triumphs in California's Mojave Desert, private capital may never reach the other start-ups targeting the X Prize or building their own suborbital spacecraft. Dithering in Congress presents the primary obstacle. For a year and a half, industry advocates have urged Washington to pass legislation authorizing the FAA to grant launch licenses for manned suborbital space flights. The proposed new law (dubbed H.R. 3752 or the Commercial Space Launch Amendments Act of 2004) would establish that passengers fly at their own risk, removing the possibility of huge lawsuits if a flight were ever to end, er, unhappily. Space proponents say that the lack of clear legal regulations would impose a burden the new aviation industry never had to endure in the early 20th century, potentially scaring off investment capital and snuffing out the industry in its infancy. Though investors more sensitive to the legal liabilities than either Richard Branson and Paul Allen are staying away until the law is passed, it appears Congress will not act on the bill before it adjourns early next month.

The other obstacle for healthy competition in the new industry is American Mojave Aerospace Ventures and Virgin Galactic themselves. Will other investors back rival companies when there is already an established leader with successful test flights? (No other X Prize competitors or any other private space companies have successfully launched a ship to space.) While applauding Rutan's accomplishments with one hand, his rivals are privately wondering whether their ship designs have a future. Even after another successful Rutan space launch, John Carmack, the millionaire software developer behind X Prize contender Armadillo Aerospace, says, "Your guess may well be better than mine as far as the investment climate." Gary Hudson, a longtime space entrepreneur with several unsuccessful space startups to his name, says, "It will be hard for anyone to compete with the Virgin/Scaled Composites/Paul Allen team."

Nonetheless, prospective space investors should remember that the game rarely ends when one company jumps out to an early lead. Think Netscape and Internet Explorer--or Kmart and Wal-Mart. "It's not the first guy who wins. It is the second and third guy who learn the lessons the hard way," says Futron director Phil McAlister. PayPal co-founder Elon Musk of SpaceX, who is developing his own commercial rocket company, says a dominant leader may actually be good for the private space business. "This industry needs a Netscape. The fact of the matter is that until someone actually builds a valuable company in commercial space, obtaining outside capital will be extremely difficult."

So let's continue to root for Rutan, while keeping an eye on the other entrepreneurs with dreams, innovative spaceships--and business plans.