ULA Woes Increase Competition in U.S. Launch Industry

ULA Woes Increase Competition in U.S. Launch Industry
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The U.S. Federal Trade Commission (FTC) has launched an investigation into unfair trade practices on the part of United Launch Alliance (ULA)—a joint venture between Lockheed Martin and Boeing that has a semi-monopoly on the U.S. governmental launch industry. While seemingly detrimental to the U.S. government’s launch capacity, in fact, this represents a positive development for the future of the space industry in the United States.

Additionally, the news that Orbital Sciences Corporation, a rival launch company, is suing ULA for monopolistic trade practices similarly bodes well for the U.S. space launch industry. The American space launch industry—in both the commercial and government sector—has long been hampered by a lack of competition. The FTC’s investigation will, with luck, pave the way for a new generation of space launch companies within the U.S., and in doing so will benefit both the United States and the world at large.

For many years, the United Launch Alliance has had an effective monopoly supplying launch capacity—the ability to put a satellite into space—for the U.S. government. Until November 2012, Department of Defense regulations stated that the bidding process to supply launch services to the government was a closed one, meaning that only ULA platforms could be used. This—combined with what Orbital Sciences Corporation alleges is an unfair exclusivity agreement with RD AMROSS, the company that builds the RD-180, a major rocket engine that ULA uses for its Atlas line of rockets—meant that ULA had a virtually insurmountable market advantage over its competitors.

It is important to note that, with a record of 76 successful consecutive launches, ULA has certainly proven itself to be a reliable launch contractor. However, as a monopoly, the company had no incentive to keep its costs low. When launch costs began to skyrocket, the U.S. government’s prioritization of reliability over cost efficiency began to seem questionable, and it is likely that, given current U.S. budget woes, low costs will become increasingly important for governmental space launches.

In the last month, a host of new developments—of which the FTC investigation and Orbital Sciences’ lawsuit are only the most recent—have put ULA’s launch monopoly in jeopardy. The November 2012 decision that broke the ULA monopoly on launch contracts opened the door to companies, which have previously established successful international and commercial launch businesses, to apply for governmental contracts.

Earlier this month, SpaceX announced that it had signed an agreement with the U.S. Air Force that would allow the Air Force to study three of its Falcon 9 launches and eventually certify the launch system so that it could bid for government contracts. Similarly, Orbital Sciences Corporation recently successfully launched its Antares system, a prelude to the system eventually being submitted for Air Force certification as well.

These developments—combined with the recent FTC investigation of ULA, and Orbital Sciences’ recent lawsuit—mean that ULA is doubtlessly in for a rough time in the immediate future. However, opening up the U.S. launch industry is ultimately a positive development for all concerned. ULA has a longstanding reputation as one of the most reliable launch providers, and this reputation will not disappear overnight, even in the face of increased competition.

Indeed, increased competition will force both ULA and its rivals to drive down costs and innovate, eventually leading to a new range of launch capabilities more tailored, not just to the needs of the U.S. government, but to the needs of domestic businesses and international customers as well. ULA’s short-term loss is the overall space industry’s gain, as ULA’s setbacks, temporary though they are, will create the opportunity for other launch providers to enter a lucrative marketplace.

Categories: Economics, North America

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