At a time when the US government is concerned about its reliance on a mercurial billionaire for access to space, new competitors say Elon Musk’s SpaceX is using tactics intended to squash them.
Elon Musk aggressively elbowed his way into the space launch business over the past two decades, combining engineering genius and an entrepreneurial drive with a demand that the US government stop favouring the big, slow-moving contractors that had long dominated the industry.
Today, it is Musk who is dominant. His company, SpaceX, is the primary provider of launch services to Nasa and to the Pentagon. His rockets carry far more commercial satellites into orbit than anyone else’s, including those for his own Starlink communications network. He has set new standards for reaching space cheaply and reliably.
But in one striking way, the former outsider has come to resemble the entrenched contractors he once fought to topple: He is increasingly using his vast power and influence to try to keep emerging rivals at bay, his competitors say, even as his success is prompting qualms within the government about such heavy reliance on a mercurial billionaire.
The new generation of space entrepreneurs trying to emulate Musk is sufficiently concerned about what they see as his anticompetitive tactics that some of them are now willing to take him on publicly.
Tim Ellis started Relativity Space after being inspired by Musk’s pursuit of a rocket that could carry humans to Mars. Then he heard from other industry executives that individuals with ties to SpaceX were trying to block his efforts to raise money for his own Mars project.
Jim Cantrell worked with Musk at the founding of SpaceX in 2002. When he started to build his own launch company, Phantom Space, two potential customers told his sales team they could not sign deals because SpaceX inserts provisions in its contracts to discourage customers from using rivals.
Peter Beck, an aerospace engineer from New Zealand, met in 2019 with Musk to talk about Beck’s own launch company, called Rocket Lab. Several months later, SpaceX moved to start carrying small payloads at a discounted price that Beck and other industry executives said was intended to undercut their chances of success.
“I don’t think this is an accidental monopoly,” Beck said in an interview about SpaceX and Musk. “These are business decisions that are being made.”
None of these executives said they had taken legal action against SpaceX. And no one in the industry disputes that Musk and SpaceX deserve enormous credit for making spaceflight more affordable and almost routine.
But his tactics are generating a backlash within the industry. And they are adding to concerns in the government about relying so heavily for a critical technology on someone known as much for his divisive public statements, his increasingly outspoken political positions that are at odds with US policy and his deep business ties to rivals like China as he is for his engineering prowess.
Musk endorsed an antisemitic theory late last year on his social media platform X. He has nurtured relationships with right-wing leaders around the world. And he has publicly stated that Russia will not lose its war against Ukraine, endorsing an argument that the United States should not have provided Ukraine with additional military assistance.
“Elon Musk’s rhetoric and behaviour undermines his credibility and reliability on a global scale,” said Senator Jeanne Shaheen, D-N.H., who this spring questioned Pentagon officials about Musk. “Commercial services, including SpaceX, that do business with the US government need to be thoroughly vetted to ensure that the US military can depend on them in times of crisis.”
Last month, a bipartisan group of 36 House lawmakers sent a letter to Frank Kendall, the Air Force secretary, urging him to make sure that the Air Force pushes for “increased competition among launch providers.”
Representative Dale Strong, R-Ala., whose office helped draft the letter, said he was concerned that a dominant Pentagon launch provider might squeeze out upstart rivals. “These smaller companies, they’re just trying to cut their teeth,” he said.
SpaceX did not respond to requests for comment. But when interviewed at a recent industry conference, one of SpaceX’s senior executives disputed any suggestion that the company was trying to force other new launch companies out of business.
“I don’t buy that, not at all,” Gary Henry, who works on national security contracts for SpaceX after earlier posts with Boeing and the Air Force, said in the interview. “I can see if you are on that end of it, it might feel that way. But people in those companies who know us personally know that is not the case.”
In a presentation to SpaceX employees in Texas this year, Musk did not directly address claims of anticompetitive behaviour from rivals in the launch industry. But he noted that SpaceX had carried cargo to orbit, or agreed to do so in the future, for competitors in related businesses including Amazon, Telestat, OneWeb and Apple-backed Globalstar, all of which are rivals of SpaceX’s Starlink communications network.
“We’re actually on contract to launch Amazon’s Kuiper constellation,” Musk said, evoking a round of laughter from the gathered SpaceX employees. “And we treat everyone fairly.”
SpaceX’s defenders also point out that the launch business appears to be growing more competitive, not less.
Jeff Bezos’ Blue Origin is close to its first launch for its New Glenn rocket. Rocket Lab is building what it calls Neutron, and Relativity Space is working on its Terran R, among other new entrants. After years of delays, Boeing is soon expected to start launching Nasa astronauts into space on its new Starliner spacecraft.
For now, though, the ability of the United States to reach orbit, particularly for its most vital classified military and spy satellites, remains largely dependent on Musk and his Falcon 9 rocket.
“Heaven forbid we have a mishap with a Falcon 9 launch,” said Colonel Richard Kniseley, who helps run Space Force’s Commercial Space Office. “That means it is grounded, right? And that means we could be without launch. So that’s where my concern is.”
SpaceX has collectively been awarded US$14.7 billion ($24 billion) in federal launch prime contracts over the past decade, according to an analysis performed by The New York Times by the Center for Strategic and International Studies.
Last year alone, SpaceX secured US$3.1 billion ($5 billion) in federal prime contracts, according to the data, nearly as much as the combined amount the federal government committed for space transportation and related services from its nine competitors, from giants like Boeing and Northrop Grumman to startups like Blue Origin.
SpaceX is privately held, so it does not release revenue figures, but Payload, an industry research site, estimated that nearly 60% of SpaceX’s launch-related revenue last year came from the federal government.
This means that despite Musk’s early disdain for government subsidies granted to his rivals, including Lockheed and Boeing, SpaceX’s own rise has been bankrolled in large part by Nasa and the Pentagon.
At the same time, SpaceX has increasingly adopted business tactics that Musk once condemned, including expanding its lobbying presence in Washington and hiring top Pentagon and Nasa executives after they played key roles in awarding contracts to SpaceX.
SpaceX now employs William H. Gerstenmaier, who supervised the Nasa commercial cargo programme that hired SpaceX.
SpaceX also hired Terrence J. O’Shaughnessy, a former Air Force general who first moved to retain SpaceX to provide its Starlink satellite service to the military, and Kathy Lueders, who was the lead Nasa contract official who picked SpaceX for a US$2.9 billion ($4.7 billion) contract for the spacecraft that will take Nasa astronauts from lunar orbit to the surface of the moon for the first time in 50 years. (SpaceX did not respond when asked about these hires. No one has accused the former officials of favouritism.)
SpaceX has boosted its spending on lobbyists by 30 per cent since 2020, reaching US$2.9 million last year, federal records show. (That is still far less than the spending on lobbyists by giant military contractors like Lockheed and Boeing, or Amazon.)
Lori Garver, a former Nasa official who pushed for Nasa to hire private companies to take astronauts to and from the space station and has repeatedly praised SpaceX’s performance, said she too has been surprised by the company’s aggressiveness.
“I underestimated how it would play out over the long term and the dominant position they would get to,” she said. “And the lengths to which they would go, once in the dominant position, to fight to keep that dominance.”
Outsider no more
It was a foggy morning in February at the Cape Canaveral Space Force Station in Florida, as bursts of supercooled oxygen sprayed from the upper sections of the Falcon 9 rocket — a sure sign that yet another SpaceX rocket was about to blast off.
At the moment the launch window opened, the Falcon 9 lifted off, carrying 23 Starlink satellites to low Earth orbit — about 370km up in space. It marked the start of a burst of activity that demonstrates just how dominant SpaceX has become.
Three days later, at an adjacent Kennedy Space Center launchpad, another SpaceX Falcon 9 lifted off, this one carrying four astronauts on a Nasa-funded flight to the International Space Station.
Two more Falcon 9 launches followed, later that day and the next. One, launched from California, was stuffed with 53 spacecraft from companies that had shared a ride on SpaceX’s Transporter service, which allows companies to book a slot for their cargo online.
In south Texas, SpaceX then had its third test flight of Starship. It is the largest rocket ever created — big enough to carry three times as much cargo as Nasa’s Space Shuttle was capable of lifting into orbit and at a price so low, it could completely upend the commercial launch market again.
Finally, by late March, SpaceX had launched its 30th cargo delivery toward the space station.
SpaceX’s 96 successful orbital launches during 2023 contrast with seven launches to orbit from the US in total last year by all of SpaceX’s competitors, and were more than all launches from Russia and China combined. The majority of SpaceX launches last year were to put its own Starlink satellites into orbit, but even without Starlink, it has a dominant role.
The United Launch Alliance, a joint venture set up by Lockheed and Boeing, sent only three rockets to orbit last year.
Those figures are a striking shift from a decade ago, when SpaceX sued the Air Force asserting that it had illegally directed launch business to the Lockheed-Boeing joint venture, known as ULA.
“Boeing and Lockheed joined forces to convince the Air Force that the culprit was competition itself, and formed ULA to monopolise,” the company wrote in its 2014 bid protest. The lawsuit demanded that the Air Force award some of its military launches to SpaceX, which at that point still had not been certified by the Pentagon as reliable enough to carry high-value national security cargo.
Musk also slammed what he said was unnecessary federal funding that was going to these companies, suggesting that such subsidies were wasteful.
Now SpaceX is enjoying a steady flow of government money as its record of reliability and low costs fosters more federal contracts.
Even when major contractors like Boeing have attempted to compete with SpaceX, it has taken them longer to get their spacecraft built, and what they produce comes in at a much higher price. One example is the Starliner that Boeing is building under a US$4.3 billion ($7 billion) contract for Nasa to deliver crews to the International Space Station.
Once Starliner is operational, it will cost Nasa an estimated US$90 million ($147 million) for each astronaut launched to orbit through 2030, compared with US$55 million ($90 million) a seat on SpaceX, according to the agency’s inspector general.
Musk’s fierce competitive tactics were on display in 2014, when he pushed the federal government in a lawsuit to enforce a plan to prohibit the Lockheed and Boeing joint venture from continuing to rely on a Russian-made engine for the Atlas V rocket it used to send military and spy satellites into orbit.
Congress and the Obama administration were already pushing the companies to find an American-made replacement. But banning the use of the Russian engine before a reliable alternative could be put in place would have left United Launch Alliance unable to meet the Pentagon’s launch needs — in turn creating an opening for SpaceX.
“We design and manufacture the rockets in California and Texas with key suppliers throughout the country,” Musk told a Senate committee in 2014.
Air Force officials worried even then that a ban on use of the Russian engines might mean replacing one monopoly with another.
“We have been concerned for some time that with the course that we are on, we may end up with one launch service provider,” Kendall, now the Air Force secretary, told the Senate in 2016, when he was serving as the service’s top acquisitions officer.
That prediction has to some extent come true.
We’ve selected @SpaceX to provide launch services for the Power and Propulsion Element (PPE) and Habitation and Logistics Outpost (HALO)—the foundational elements of the #Artemis Gateway. https://t.co/zUuPUP0CXs
— NASA Artemis (@NASAArtemis) February 9, 2021
Forced to phase out its use of the Russian engines, ULA ultimately declined to bid on at least four additional federal government launch contracts beyond those it already had on its books. The four new launches, cumulatively worth about US$850 million ($1.39 million), went to SpaceX, Nasa and Pentagon records show.
Henry, the SpaceX executive, said the United Launch Alliance had no one to blame but itself.
“So they had a good thing going and got complacent,” he said. “And then to their misfortune, Elon and SpaceX showed up.”
Squeezing upstarts
Beck, the CEO of Rocket Lab, started the company in 2006, just four years after SpaceX was created and before SpaceX had sent its first rocket to orbit.
Since then, Rocket Lab’s Electron launch vehicle has had more than 40 successful trips to orbit, delivering almost 200 satellites to space at one of the lowest costs in the industry.
Now the second most frequent orbital commercial launch company globally behind SpaceX, Rocket Lab is moving to build Neutron, a larger rocket that will compete directly with SpaceX’s Falcon 9.
Beck said he had observed early on that SpaceX was willing to go after its business rivals.
He and other industry executives said they were convinced that SpaceX had set the price for its Transporter service — where small satellite companies can book slots on a Falcon 9 launch — with the explicit goal of undermining the financial plans of emerging competitors.
Transporter’s low price — initially $5,000 per kilogram — was below what some industry executives calculated was SpaceX’s basic cost. They concluded that SpaceX could only offer such a low price by subsiding those flights with some of its government contracting revenue.
More recently, SpaceX started what it called Bandwagon, which offers satellite makers launches to orbits that provide them better coverage over key sections of the world. SpaceX is selling these flights at far below its own costs to undermine its competition, Beck said, citing his own estimates.
“Bandwagon is like, the most bold and obtuse anticompetitive thing you can do,” said Beck, whose company charges about US$21,500 ($35,200) per kilogram for its launches to specific orbits.
Henry, the SpaceX executive, disputed that SpaceX might be using its market dominance to hurt its competitors.
“We make money on all our launches,” he said.
Flights that carry multiple private and government payloads on a single Falcon 9 launch, he said, are benefiting the commercial space industry by making it more affordable for small firms to get satellites into orbit.
Ellis of Relativity Space said SpaceX had made explicit and repeated efforts to limit the growth of his business.
“Every single funding round that was done once we started to become a larger company, and every single customer deal we have signed, has been followed with a swift and large number of outreach calls from SpaceX to all of those entities berating them for doing things with us,” he said. “This is not theoretical.”
Cantrell, whose company Phantom Space has received funding from Nasa to help build its new launch vehicle, said his sales team had been told by Sidus Space and a second company that SpaceX had demanded contract provisions intended to limit their ability to hire other launch providers.
Carol Craig, the CEO of Sidus Space, confirmed in an interview that SpaceX had a “right of first refusal” provision in a deal she had signed for five launches, allowing SpaceX to counter any offers from its competitors.
“Are they saying you absolutely have to? No,” she said, adding that her company has a nondisclosure agreement with SpaceX that prohibits her from discussing the exact terms of her deal. “It doesn’t feel like they’re trying to monopolize.”
But Cantrell said he was convinced that SpaceX was trying to block out emerging competitors.
“It’s anticompetitive and anti-American and I don’t like it,” Cantrell said.
Even with these impediments, Cantrell said he had been able to build a manifest with approximately $80 million worth of contracts for future launches. But he has been delayed in getting his new rocket built and operating because of trouble raising the necessary capital.
Fickle billionaires
The concerns about SpaceX’s dominant position only escalated when Musk denied a request from Ukraine in 2022 to turn on his Starlink coverage over Crimea so that Ukraine could use it to target Russian military assets, as was first reported by Walter Isaacson last year in his biography of Musk.
Kendall, the Air Force secretary, said the Pentagon subsequently reviewed its contracts with SpaceX to address “whether I was comfortable depending upon billionaires and their potential fickleness for military services.”
The Pentagon announced soon afterward that it had reached a new deal with SpaceX for a satellite-communications system it calls Starshield that is much like the existing Starlink network, but “will be owned by the US government and controlled” by the Space Force, Musk confirmed. Reuters later reported that the National Reconnaissance Office, an intelligence agency, also has a classified US$1.8 billion ($2.9 billion) contract to get access to Starshield.
Pentagon officials said that SpaceX has honoured its commitments.
But the Defence Department has moved recently to try to expand its launch providers, both for small payload launches and its most expensive, classified, national security launches.
Pentagon officials said that SpaceX had argued that another national security launch provider was unnecessary, an assertion that Henry did not dispute.
“We did say we don’t think there’s a supply shortage,” he said. “But we are all good. Competition is good.”
SpaceX’s Starship, its newest rocket, which is now undergoing testing, is likely to have a far lower price for hauling cargo to orbit than any of its competitors, according to industry analysts. Its rates to carry a satellite into orbit could be as low as US$200 ($328) a kilogram, compared with US$65,000 ($106,000) per kilogram by Nasa’s Shuttle before it retired, or the US$6,000 ($9,800) now that SpaceX charges for its Transporter flights.
That means SpaceX’s Falcon 9 and Starship could dominate the space launch industry for the decade to come, some industry officials predict, with Musk already projecting that SpaceX could deliver 90 per cent of the world’s cargo to space this year even before Starship is counted, up from about 80 per cent in 2023.
“There’s not a lot of industries where a company is doing like 80 per cent of everything,” Musk told his employees, expressing pride over how dominant SpaceX has become.
Beck, the founder and CEO of Rocket Lab, said no matter what actions SpaceX takes, he believes the best way to respond is to keep launching, including the climate science satellite his company put into orbit last weekend for Nasa.
“Whatever shady practices he wants to do along the way, then so be it — we don’t care,” Beck said. “Because at the end of the day, you have to compete. And if you can’t compete, then you can’t compete.”
But Henry of SpaceX said that the impact of its continued expansion is clear to those inside the company.
“My heart bleeds for these small launch companies, right?” he said. “Because they’re not all going to make it. Most of them are not.”
This article originally appeared in The New York Times.
Written by: Eric Lipton
Photographs by: Todd Anderson
©2024 THE NEW YORK TIMES
