Space Symposium, Colorado Springs, Colo.

AIA President and CEO David F. Melcher
Space Symposium, Colorado Springs, Colo.
April 4, 2017
Remarks as prepared for delivery

Thank you and good afternoon. As CEO of the Aerospace Industries Association, I represent over 330 members, including companies who were present at the dawn of the space age 60 years ago, as well as newer space firms who are having an impact on the industry. On behalf of all our companies, I am truly honored to be here once again at the Space Symposium.

I want to talk today about assuring U.S. space competitiveness, one of AIA’s top strategic priorities for 2017. We recognize that having a strong domestic space industry is vital to everything we do in the national security and civil space arenas and to our nation’s long-term economic prospects. As such, our association believes the Federal government should make our space industry’s success a high priority.

Today, commercial space activity is no longer subordinate to the dedicated government programs that once dominated space news coverage. It now represents three-quarters of global space economic activity. Indeed, space has been growing in its commercial importance ever since NASA launched the first private sector telecommunications satellite known as Early Bird over 50 years ago. And now, global commercial space and space enabled services account for many times the activity of NASA, the U.S. Air Force and international government efforts.

But just as with other industries that America pioneered, we can’t take our leadership for granted. Empty factories around this nation attest to the risk of overconfidence when we compete in international markets. In an age where many countries aggressively nurture their space industries, we must think more boldly about making our domestic industry more competitive as the uses of space expand.

With new markets emerging for everything from internet communications, remote sensing, satellite servicing, space transport and space manufacturing, we simply cannot afford to be left behind.

And let me underscore something crucial to my message: When I talk about space competitiveness, both established commercial companies with billions of dollars in space sales and the emerging space entrants pursuing new businesses are central to making this success possible.

All of these companies have a common interest in the need for policy makers to take a fresh look at the policies, regulations and tax structures impacting America’s space leadership.

I might add, we welcome newcomers to the industry to have a seat at the table when AIA develops its strategies and advocacy plans for the U.S. space industry. And we recognize that in this field, success does not happen overnight.

To this end, our Board of Governors just approved Membership eligibility for companies with promising ideas that don’t yet have a history of constant revenue streams.

In our advocacy, we are careful to make the point that while commercial space success is vital to our national security, it is not a replacement for essential national security space investment to meet unique requirements. Additionally, the federal government’s investments in long lead technologies often results in far reaching payoffs down the road – as it did with the development of the first space launch systems and early telecommunications satellites.

With all these factors in mind, we believe we’re in alignment with how the policy making and budget environment is shaping up. Think about it this way: A clear Administration priority is to create good manufacturing jobs here in the U.S. And what better way to spur job creation than by bolstering the US-based aerospace and defense sector that’s responsible for America’s largest net positive balance of trade?  Yes, the U.S. aerospace and defense industry was some $90 billion in the black last year, with space related sales and jobs being a significant contributor to this enviable record.

Also, because political leaders on both sides of the aisle want to champion an economy fueled by the engine of innovation, a strong case can be made to eliminate the regulatory overreach currently hampering the space industry’s creative potential.

And finally, as we begin to reinvest in national security priorities that have been artificially shortchanged by the budget control caps and sequestration, the timing is right to begin recapitalizing the unique military systems essential to our warfighter’s success as well as the technological seed corn for future success.

As such, I’m hopeful that we can make bi-partisan progress on enacting policies and budgets to support a vital industry that’s so important for national security, U.S. leadership in the global economy and future innovation.

At last year’s Space Symposium, I called for a 21st Century Space Competitiveness Strategy, with policy, regulatory and advocacy elements that focus on technology development, workforce, exports and innovation to help our companies compete in the global space marketplace. Sadly, we haven’t done so yet, and the need is even greater today.

Within the past 12 months, our space industry’s innovative leaders have continued to demonstrate why this is a sector worth betting on. We’ve seen significant progress on commercial launch and space activities in low Earth orbit. We’re closer and closer to a time in which space tourism is an everyday part of the world we live in. New concepts—such as satellite enabled WiFi services anywhere on the planet—illustrate that we’ve barely scratched the surface of the space economy’s growth potential. And, we are now creating a space-based GPS system for Air Traffic Management. Indeed, when you think about revolutionary ideas like driverless cars and automated delivery drones, it is space systems that will make these incredible concepts possible.

On the other hand, we’re still encumbered by government policies that hinder this vital industry. For example, the Commerce Department took more than two years to move forward on export control reforms for satellites and other space systems. While the delay was bad enough, the improvements made weren’t worth the wait. The new rule continues to restrict the exportable size of satellite imaging system apertures for remote sensing satellites, below those already available in the internationally competitive marketplace.

This has created further problems for our U.S.-based satellite industry. Indeed, while the satellite rule-making was underway, several satellites manufactured by a foreign competitor were launched with apertures of 0.64 meters, well above the new 0.5-meter limit. If our regulations are not reformed further, this trendline will continue, and future sales opportunities and billions in potential revenues will be lost.

This policy shortcoming, combined with non-competitive corporate tax policies and additional regulatory challenges, continue to undermine the potential of our space industry. This worries me a great deal and I hope everyone in this room shares my concern.

There’s some other troubling news on the export front. While most attention is given to aircraft sales—which are positive— U.S. space export efforts are being significantly hampered by an issue I discussed here last year.

And that’s the inability of the Export Import Bank of the United States to provide sufficient loan guarantees and credit insurance for international satellite sales and domestic launch service providers. The numbers are clear. From 2010 to 2014, Ex-Im supported over $4 billion in satellite exports. That level of support has ground to a halt with the Bank in limbo, as you can see from the slide’s depiction of the paltry $4 million of Ex-Im activity on satellites starting in 2015. This is negatively impacting our space industrial base and is driving up the cost of vital national security space systems.

The truth is, Ex-Im can’t conduct significant business until this Administration nominates, and the Senate approves, additional members for its Board of Directors to achieve a quorum for deals over $10 million dollars. Mind you, both the House and Senate overwhelmingly –and in bipartisan fashion– approved continuing the Bank in 2015. It is time to fix this problem.

To help give policy makers a better understanding of the stakes at play in the emerging space marketplace, this winter AIA and Bryce Space and Technology joined forces on a U.S. space competitiveness study. You should have received a copy of the report’s Executive Summary in the welcome package you received at registration, and I encourage you to look it over.

This study notes that the commercial, civil and national security space sectors are increasingly interrelated, generating innovative solutions, export revenues and high technology jobs for our citizens. These sectors also underpin our security in ways seldom understood by the public.

But the report warns that foreign commercial competitors in China, India, Japan, Europe and Russia are catching up. What’s helping them close the gap are some of our own self-inflicted policy wounds, and the intention of these countries to invest aggressively in their space industries.

As mentioned, this year marks the 60th anniversary of the Space Age. When Sputnik first launched, we didn’t have a space industry per se, and it took major government investment in space activities to create one. Today, that industry is experiencing dynamic change, driven by growing demands for space services in the developed and developing world.

At the same time, potential adversaries are also adding to their space capabilities in ways that threaten our long-term technological superiority. A robust U.S. space industry will help mitigate this risk by fostering greater innovation and by increasing the number of platforms where national security capabilities can be deployed.

To capitalize on these and other opportunities, and to persevere through the boom and bust cycles we always seem to have in national security spending, there’s a case to be made for providing the domestic space industry a proactive and responsive policy and regulatory environment aimed at enabling commercial success.

In our report on space competitiveness, we see three priorities for enhancing and strengthening the U.S. space industry.

First, we believe in “Leveling the Playing Field” in the international space marketplace. It’s simply not fair to expect our companies to compete shackled by outdated export rules, the inability to draw on export credit financing, or a tax system that doesn’t do enough to encourage US-based space investment.

Our second set of recommendations calls for “Expanding space market opportunities.” To this end, we must preserve a reasonable allocation of spectrum to enable space communications services and new satellite applications. Policy makers should simply recognize that mobile telephony is not the only spectrum application out there. Can any of you imagine a world where GPS didn’t exist because the optimal spectrum had been sold to solve a short term federal budget gap? That’s the logical and frightening extension of this kind of reasoning.

The government also needs to step up efforts to closely monitor the orbital environment and provide incentives – including consensus standards – for space actors to reduce hazardous debris. And to help new space business opportunities such as space tourism thrive, the government must modernize the application of the Missile Control Technology Regime restrictions. Simply put, many of the new peaceful commercial applications that have emerged do not pose any credible military technology proliferation risk. And if necessary, extra safeguards can be implemented, as was done for launching U.S. satellites on Russian launch vehicles.

We believe the process for regularly reviewing and updating export control rules is moving far more slowly than technological change, market forces, and international competition would dictate. And we intend to keep the drum beat going for further reforms in export control policies.

Finally, our report spotlights the need to “Make space competitiveness a national priority.” Achieving this goal will require continued government investments in fundamental space technologies which in turn will lead to new commercial investments in pursuit of new opportunities. It also requires government rule makers to adopt a mind-set that space is poised to become a more important engine of national economic growth in the future. This is one area where our industry sees a strong potential role for a new National Space Council, which can emphasize interrelationships between national security, civil and commercial space activities and accelerate the interagency decision making process on relevant issues.

Taking a more sector-specific view, NASA’s ability to conduct new civil space missions with the limited resources allocated is enhanced by the space industry’s strong participation. The example of commercial crew and cargo support services to the International Space Station provides a terrific illustration of commercial companies freeing up NASA resources and capabilities to do deep space exploration.

Following on NRO Director Betty Sapp’s great presentation, I wish to briefly touch on our industry’s position on the criticality of national security space assets. It is essential to our national security that a wide variety of sophisticated space reconnaissance, communications, command-and-control, navigation and weather assets be in place, maintained and replenished. It’s also critical that we have a healthy space industrial base to design the innovative space architectures of the future, which in many cases will have commercially provided payloads and launch systems.

Building on this point, I hope you share my concern that due to the Budget Control Act of 2011, Congress has failed to adequately fund the badly needed replenishment of national security space systems for navigation, reconnaissance and communications. This has led to program delays and unnecessary program budget growth.

As this slide demonstrates, current investments in national security space are at a rate far below historical norms, even though these systems are aging and risk falling behind competitors’ capabilities if not refreshed. Space investment budgets must increase if we are to support the recapitalization of these national security space assets which are so crucial for the success of our warfighters.

Our industry is taking on this fight with great passion and energy. AIA’s top advocacy priority this year is to promote tangible growth in national security investments. This is a priority that national security professionals from the Joint Chiefs on down, the Administration, and Defense Committee chairs in Congress have recommended. We must get relief from the budget caps and eliminate the threat of sequestration. The Administration’s proposed national security budget takes a step in the right direction, but does not go far enough in our view.

As we all know, our nation’s space industrial base is not anywhere as large as other economic sectors—automotive, construction or energy for example—those with huge economies of scale and segmented markets that are largely independent. Instead, the space industrial sector is comparatively small, and if one segment of it is not healthy, there can be negative ripple effects throughout the entire industrial base. So, if you remember one thing from my remarks today, let it be that the health of the commercial space sector is vitally important to our national security and to what we hope to accomplish in civil space. We simply cannot get anywhere from here without the robust participation of the U.S. space industry.

With this thought in mind, our work on Capitol Hill and in the halls of the new Administration will continue in the months ahead as we seek stronger policies and budgets to advance all aspects of our nation’s space industry. I look forward to working with the Space Foundation on this, and with government leaders like Congressman Jim Bridenstine who is here at the Space Symposium, and who understands how important space is for our nation’s security, growing our economy and space exploration.

As we enter the seventh decade of the Space Age, my appreciation goes out to everyone in this audience who has dedicated your work to one of the most noble and rewarding pursuits of our time. Thank you again for your time and attention.