Remarks from PSSI Space Security Conference

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On June 11, 2019, Kevin O’Connell delivered remarks at the PSSI Space Security Conference in Prague, Czech Republic. Below are his remarks as prepared for delivery.

The Role of the Private Sector in Space Security

Fifth PSSI Space Security Conference
Evolution of the Counterspace Threat and Strengthening of International Space Partnerships
June 11, Prague, Czech Republic

Remarks of Kevin M. O’Connell
Director, Office of Space Commerce
U.S. Department of Commerce

Thank you, John Sheldon for that great introduction to our topic. And thank you to the Prague Security Studies Institute for the invitation to participate, in this my first visit to Prague.

My name is Kevin O’Connell and I am the Director of the Office of Space Commerce at the US Department of Commerce. We’re revitalizing an office created over 30 years ago to focus on the many dimensions of space commerce, including how they interact with the security issues we are discussing here.

First of all, kudos to PSSI for actually recognizing the importance of the private sector in the space security discussion and organizing this panel. At a time when there are alternative views about the overall future of space, we need to be more deliberate in our thinking about how businesses participate in all aspects of space security.

Why? Gone are the days where national security and commercial interests were considered purely oppositional; today, they are directly intertwined with strategic and long-term effects.

That said, even after decades of government and commercial space interactions, we are only beginning to fully understand the differences in outlook, what constitutes success for both sides, and other perspectives. Governments carefully consider how to spend public dollars, while companies are under pressure either to succeed or “fail fast.” We remain, as Dr. Pace suggested 20 years ago, in a “Merchants and Guardians” moment where each side still doesn’t fully understand the other.

Yet even today, as we struggle to understand, those perspectives are changing. At Commerce, we see a future of space that is overwhelmingly commercial, with related economic and security benefits. Those benefits will help improve life on earth but also extend our reach to the Moon, Mars, and beyond.

The commercial space sector continues to grow and diversify, globally. Entrepreneurs with a wide range of backgrounds and companies of all sizes are coming forward with new ideas that potentially disrupt our thinking about use of space. They employ industrial concepts like standardization, reusability, and continuous learning, even as they tap a broader ecosystem of technologies like cloud computing, advanced manufacturing, and artificial intelligence. Adapting business models will be as important as technology.

Every week, a handful of entrepreneurs cross our doorstep at Commerce to propose concepts that could either disrupt the “traditional” commercial space functions — communications, remote sensing, navigation applications, and weather — even as others come forward with new concepts in satellite servicing, advanced manufacturing, robotics, space tourism, and others.

While governments and industry are investing in space, at times cooperatively, the rates of innovation in each community is dramatically different. Governments are and should be backing initiatives at the cutting edge of science, safety, and security that use scarce public funds appropriately. The private sector is backed by a growing and increasingly sophisticated community of investment and insurance that shifts risk and encourages speed and diversity in a competitive global market. Private investment in space reached an all-time high in 2018, and there are no signs of it cooling off in 2019. Larger financial institutions are also taking interest.

While space functions today enjoy very different levels of commercialization, by no means is success guaranteed. In this sense, space markets are becoming “normal” markets, where there will be success, failure, merger and acquisition, other competitive market behaviors.

Governments play important roles in this market, as customers, as patrons, as regulators, and sometimes as competitors. Within the United States, we’re seeing a shift in the traditional business model of “customer buy all” to one where the government can place small, strategic bets in exploratory areas; in the process, they provide key resources for commercialization as firms then turn to the capital markets for additional investment and scrutiny of technologies and business plans. As regulators, we have to be careful not to stifle innovation or allow dual regulation to hinder progress.

Yet, to return to our security conversation, we still pay only scant attention to how the private sector will influence, and be influenced by, security developments in space and the effects on their business on the ground. Among the other things we are doing in the Office of Space Commerce is trying to influence the level of thinking about the role of the private sector that goes into national-level planning and doctrine.

As an example, I have sat through a handful of tabletop exercises and war games where there’s nothing more than a token inject about a commercial company. Typically, an adversary will signal or apply direct influence to a commercial capability, which is then dealt with in a simplistic way. We have to do better: that treatment typically fails to consider the second and third order consequences of the move, but it also fails to consider the wide range of initiatives — like government-backed investment, insurance and indemnification, others — that would need to be developed and seeded much earlier in order to have leverage during a crisis.

Why else should we think deliberately about the role of the private sector in space security? Let me offer a few other ideas that we can dive deeper on in the question period:

  • Because defense, intelligence, and other national security organizations rely on them more. For years, military strategists have debated the concept of disaggregation in space. But increasing reliance on commercial effectively effectively creates disaggregation.
  • Because the growing space economy creates resilience. The strategic calculations of our adversaries must change as a growing number of countries develop capabilities in space, whether strategic or economic in nature. There are many new countries that are striving for a portion of the growing commercial space world.
  • Because the commercial sector will help mitigate challenges in space while enabling new opportunities. The Trump Administration’s Space Policy Directive 3, now coming up on its one year anniversary, recast the approach to space traffic management, and directed Commerce to take on a a key role in partnership with the Department of Defense. One of the key reasons for that decision is the belief that the private sector will play a key role in creating novel solutions to a growing space debris and space congestion problem.
  • Along those lines, let me reiterate our views about space traffic management. I often get questions whether the U.S. “is going to tell us what to do with our satellites?” The answer is a resounding no to that question. What we are trying to do with our approach to SSA/STM is to create such high quality and accurate information that satellite operators make decisions about whether to maneuver their satellites in harm’s way and/or collaborate with others. Along these lines, we are already planning for the involvement by allied commercial entities within the open architecture data repository that the Department is developing in accordance with SPD-3.

As we improve consideration of the commercial space sector’s role in security today, we also have to realize that it is changing and morphing quickly. Unlike our traditional defense industries, companies are seeking new partnerships for access to technology and markets at a rate we have never seen before. That is going to place unprecedented pressure on regulators and how we think about the changing relationships between commerce and national security. Anticipating market developments and maintaining some agility in regulatory environments will allow us to optimize outcomes, especially relative to our adversaries.

Along these lines, the Secretary will be co-hosting a Space Enterprise Summit with the State Department later this month in Washington D.C. to discuss the nature of international space partnerships, both government and commercial.

Another issue: in all cases, we need to deepen our understanding of the impact of space on earth, including its economic value. Our publics still have a too limited understanding of the impact that space plays in our daily lives, and we have to change that.

Last week, for example, Commerce’s National Institute of Standards and Technology released a study highlighting over $1.4 trillion in economic value across 10 private sector industries (e.g., agriculture, electricity, finance, location-based services, others) since GPS data was made available. Of course, value can be measured by how much economic activity can be enabled, but it can also be measured in the potential harm done if space capabilities are harmed. The same study projected losses of over $1B per day if GPS were to be damaged.

Even as we talk about space security and new kinds of threats in space, we have to recognize that economic and financial instruments underpin space security. So we have to continue to monitor artificial pricing, forced intellectual property transfer, economic espionage, and front companies as potential “on the ground” tools that can be as effective as the weapons that were discussed here yesterday.

Finally, you’ve heard us talk a lot about the “trillion dollar space economy” which some have recently described as cheerleading or hyperbole. Not true. Within Commerce, we have been spending time on understanding the methodologies that underpin these estimates from private organizations, but also trying to understand the building blocks for that kind of growth in the space economy. What we can all agree on, of course, is the need for more focused and rigorous analysis in this area.

The Office will be participating in next week’s OECD meeting on the economic impact of space debris, and we have already kicked off an internal Department of Commerce effort involving the Bureau of Economic Analysis designed to improve the capture of commercial space activities.

Thank you, and I will look forward to your questions.