By Sutherl, Benjamin
Newsweek International , Vol. 153, No. 06
Byline: Benjamin Sutherland
Strict rules on U.S. military technology have helped boost Europe to the top of a $100 billion industry.
"Contaminated by American technology" makes for a curious but enlightening description. For most of the past century, the world has viewed American technology as unrivaled, and the notion that the U.S. space industry could be shunted to the margins would have seemed absurd. But the attitude of European space-industry executives toward U.S. components and software has changed in recent years. When building, launching or operating satellites and other spacecraft, many have come to believe, American know-how is now a liability.
The culprit is not American technology per se, but onerous restrictions the U.S. government has placed on the export of space components to all countries--enemies and allies alike. Ten years ago the U.S. Congress, fearful that U.S. technology would wind up in Chinese missiles and bombs, put commercial satellites under the jurisdiction of the International Traffic in Arms Regulations, a set of rules for purchasers of American military products. The rules say that each component of civilian spacecraft--even a rivet, if it was designed specifically for space--must be treated as a weapon.
Those rules have imposed huge bureaucratic burdens on European and Asian firms that want to use even the most modest technology made in America. The effect has been to hamper U.S. competitiveness in the space business and to give Europe a boost. The decade since ITAR took effect has seen a rapid rise in the demand for satellites and rockets to launch them, fueled by the markets for mobile phones, especially in Africa, Asia and the Middle East. Washington seems to have imposed stringent rules just as space services began to soar and alternatives to American technology took root.
The impact is most keenly felt in the $123 billion commercial-satellite business, which has been growing at more than 10 percent a year for more than a decade. In 1998, the year before ITAR took effect, U.S. firms accounted for 73 percent of the world market. Two years later U.S. market share had plunged to 27 percent. During the same period, Europe's share rose from about a quarter to more than half, according to the Satellite Industry Association in Washington, D.C.
The rules have also hamstrung U.S. suppliers in the growing space-launch business. U.S. launch firms earned $304 million in revenues from launch services in 2003, but by 2007 their take was down to $150 million. In the same period revenues from European launches increased from $178 million to $840 million, according to Forecast International, a consultancy in Newtown, Connecticut. France's reliable, heavy-payload Ariane V rocket is now the hands-down world leader, with six launches last year.
The entrepreneurial spunk and national pride of Europe and other space powers also have something to do with America's general decline. But "market distortions created by the government" due to applying ITAR to commercial satellites were the single biggest factor, says Loren Thompson, a space and defense expert at the Lexington Institute, a think tank in Arlington, Virginia. The procedures for obtaining an ITAR export license are "so unpredictable and inconsistent, and not transparent," that U.S. satellite-technology sales have suffered, says Kalpak Gude, vice president of regulatory affairs at Intelsat in Washington, D.C., the world's largest operator of commercial satellites. Consider the experience of Las Vegas, Nevada-based Bigelow Aerospace. In 2006, ITAR officials decided that the company's Genesis prelaunch satellite stand--similar in size, shape and technological sophistication to a coffee table--could only travel to Russia escorted by two armed guards. Bigelow was billed for the security detail.
Once cleared for export, even the smallest component comes with strings attached. If a satellite built by French giant Thales Alenia Space incorporates a line of computer code from a U. …