Unlike its international competitors, European Space industry heavily relies on the commercial business – mainly civil communications but also services and remote sensing applications – where it makes a significant, although highly variable, share of its turnover. Actually, the European Space industry demonstrates its competitiveness by getting almost half of the global open market, having in mind that the latter represents just a fraction of the overall global market, be it in the field of satellites or launch services.
Actually, commercial markets help industry keeping the critical mass of activity to safeguard some critical competencies. It thus contributes to the availability of the required technologies and skills at affordable conditions to meet the requirements of future European public Space systems and services.
Member states and European institutions are generally aware that, however satisfying, this situation remains tense with the on-going aggressive return of the US industry in this area when US public funds for military programmes are getting scarce, or with the future emergence of newcomers like India or China which might become fierce competitors once major national objectives assigned to their Space industries have been fulfilled.
In this respect, public support must continue to accompany the evolution of the sector and maintain its competitiveness.
Institutional programmes are key drivers for the development of new technologies, would it be in the field of Earth sciences, astronomy, Space exploration or Security and Defence. No commercial market can sustain the level of investment required to keep up with the evolution of technical requirements in these areas, and only institutional programmes can bear the level of risk associated to the in-orbit qualification of the new technologies at stake.
The fact that industry needs a sustained institutional market is indisputable. The corollary is that institutions must assume the major role they play in the structuring of Space industry through adequate industrial policies.
As long as the market cannot offer a stable framework to industry, the implementation of Article 189 of the Lisbon Treaty comes along with the setting up of an adequate Space specific industrial policy to safeguard the security of supply that European public sector needs for the implementation of its policies in an efficient and cost-effective way.
It all starts with R&D which is publicly funded everywhere in the world.
FROM INDUSTRIAL POLICY TO PROCUREMENT POLICY
After an initial phase when Space activities were fully endorsed by public bodies, the European Space industrial sector was deemed mature enough to allow for lesser involvement of governments, and there was a broad shift toward privatisation of the quasi totality of European Space industry.
Once governments deprived for their full control over industry, “industrial” policy quickly turned into “procurement” policy. In this new paradigm, the overarching rule has been to formalise a clear customer/provider relationship between public bodies and industry and to rely to the largest extent on open and transparent competition processes – within the limits of the Geographical Return obligations as far as ESA is concerned. In this new context, R&D policy is increasingly a tool to ensure the competitiveness of the European industrial base.
A LIMITED EUROPEAN DOMESTIC MARKET
As compared with the situation of other space faring nations, the European institutional market alone is insufficient to sustain a self reliant industrial capacity. As a matter of fact, overall European institutional Space budgets have been at best stagnating over the last decade. Europe in Space is currently losing ground to most, if not all other Space faring nations.
In this respect, the Space competence of the Union and the budgets it will hopefully devote to the concrete implementation of the European Space Policy are opportunities to enlarge the European domestic market and reduce the drawback European Space industry suffers on the global market.
The European Commission has made a remarkable job in identifying where space resources will contribute to many of EU public policies in areas as varied as maritime security, border surveillance, environment monitoring and climate change, resources management, etc…
Beyond the deployment of Space infrastructures, which is a necessary and preliminary condition, a mechanism must be defined so that concrete data and services are actually procured to serve these objectives.
In this respect, the recent multi-billion-dollar contract committed by the US government for their(its) future needs in Space imagery represents a major competitive advantage to the US providers in this domain. This shows the limits of a purely market driven policy.
Ultimately, a European Space industrial policy shall encompass the downstream sector to ensure the future development of a robust domestic market in the field of Space-based services.
SUPPORT TO COMPETITIVENESS
European space industry, despite to the shrinking R&D support from member States and ESA, maintains a world-class technological level. These capabilities position Europe at the forefront of Space and Earth sciences and empower the European industry on the commercial markets.
In this context, support to the competitiveness of the whole supply chain of the European Space industry is the major challenge to be taken up in terms of industrial policy. Such support shall not take the form of subsidies, but must be addressed through an adequate R&D policy and must be organised Europe-wide to ensure that European industry will continue to keep up with its international rivals, strongly backed by massive domestic markets.
The objective is to guarantee that the European Space industry will have access at reasonable and risk mitigated conditions to the top level technologies it needs. From this perspective, it is complementary to the general Research and Innovation orientation of most of the public Space R&T programmes.
As a matter of fact, with the noticeable exception of the ESA GSTP and ARTES programmes, public R&T support mostly addresses advanced technologies in their early phases while support to competitiveness should also address, in a coordinated EU approach, the following steps of developments where technologies are matured and fully qualified in products readily available to industry and programmes.
From this stand point a European initiative to provide a framework for the maturation of Space technologies, and ultimately to their full qualification in orbit would foster the current European Space R&D policies.
In many respects, supporting European Space industry competitiveness and addressing the issue of technological dependence of Europe converge on common objectives as both issues deal with access to leading edge technologies which condition the ability of European industry to be present on all potentially accessible markets.
From a historical perspective, it is interesting to note that unlike all other space faring nations, Europe didn’t put much emphasis on non-dependence. As a matter of fact, United States, Russia, China, India, or Japan have all clearly set the objective of full independence in Space as a high level priority. In this respect, the work of the Joint EC/ESA/EDA Task Force needs to be continued and its recommendations must be implemented.
Eventually, as long as other space powers do not object, it is obvious that the global market can provide for most of the technologies needed. This is in particular the case as far as Space science and open commercial business are concerned.
Actually, technological dependence does not only hamper industry competitiveness. In a tougher competitive international framework, it might also question the capacity of Europe to get access to the top performance systems and services it deserves for the implementation of its domestic policies, would it be in the field of knowledge society, resources management or security in Space and on Earth.
Ultimately, non-dependence is a matter of sovereignty. It raises the issue of the role that Europe intends to play on the international scene. As a matter of fact, it conditions its capability to undertake autonomous activities or collaborations with other space faring nations in Space without beforehand submitting requests for utilization of technologies to non-European suppliers.
A reflection should also be initiated to define the criteria which qualify a product as being “European”.
From this standpoint, it must be stressed that the rule of co-funding is generally not adapted to addressing sovereignty issues as such technologies do not most often offer a sufficient level of recurring applications for industry to justify the investment.
WORK WITH THE ACTUAL INDUSTRIAL PATTERN
Basically, in a context of absence of growth, the development of the European space industry fuelled by the continued R&T support of member States leads in several areas to a situation of structural overcapacity.
Antagonist forces are then at work:
- On one hand, institutions seek multiple potential sources to stimulate competition for the benefit of their future procurements,
- On the other hand, in a limited and flat – if not depleting – market, where major long-term procurements are scarce, industry, in an attempt to keep the critical mass and ensure the continuity of the workload in its critical skills, tends to concentrate.
A Europe-wide Space specific industrial policy shall thus account for the limited and not expanding size of the market to organise competition wherever and whenever possible between European players, and encourage new entrants only when they come up with innovative solutions and technologies, and in a seamless manner for on-going activities.
ESA AND UNION: TWO DIFFERENT PROCUREMENT APPROACHES
ESA procurement policy takes into account the origin of the funds in the awarding of contracts through the Geo Return rules.
It also integrates key objectives of industrial policy such as preserving the industrial base or targeting R&T developments in the perspective of potential needs of its future programmes.
On EU side, the general rule is to fully open competition for its procurements. This principle needs to be adapted to the Space specific context as it was done for Galileo.
It presupposes the existence of multiple potential providers to actually enable open competition and ignores formal Geographical Return rules or industrial policy objectives.
ESA procurement policy has proven to be successful in many respects and is not challenged for scientific and technological optional programmes based on the willingness of member States to join resources to achieve ambitious objectives. It shows its limits when it comes to the deployment of operational infrastructures- like Galileo and GMES – raising commercial, industrial, political and/or strategic stakes.
Regarding these future operational European Space infrastructures for instance, it is vital to set up with no delay clearly identified operators which are indispensable to:
- Ensure the proper interface between the Space agencies, service providers and end-users,
- Take up the responsibility for long-term operations and adaptation of the infrastructure,
- Ensure the delivery of continuous data to service users,
- Maximise opportunities for the development of commercial services.
This is where EU timely and opportunely steps in to provide a sustainable framework through adequate regulations and budgets.
Europe will most likely live with the coexistence of EU and ESA in space. Therefore, their respective roles need to be clarified through clear regulations.
In this respect, it is particularly important to industry to have a consistent and adapted industrial policy and transparent and stable procurement regulations.
Moreover, the intergovernmental structure of ESA, together with the capacity of member States to invest in Space should be preserved in the governance model to be developed to ensure additionality with the budgets which Union will devote to Space applications and research.
NEED FOR A SPACE SPECIFIC PROCUREMENT APPROACH
The procurement approaches implemented by ESA and EU should be consistent and cope with the specificities of the space sector.
Furthermore, independence of Europe in Space relies on the availability of a sustained supply chain. Security of supply should thus be a major concern in the future European Space policy regarding critical technologies.
Therefore, EU procurement process should be based on a dedicated European industrial policy aiming at:
- Safeguarding the European capability to conceive, develop, launch, operate and exploit Space systems,
- Strengthening the competitiveness, efficiency, reliability of the European Space industry,
- Enhancing the European technological non-dependence in the Space sector,
- Ensuring the sustainability of the sector through long term commitments and stability and predictability of rules and budgets, including the preference to use European means and assets,
- Contributing to a balanced industrial development across Europe.
Such industrial policy must of course build on existing European leading edge industrial and technological capabilities.
It should also account for the practises of all other space faring nations which actually rely to the largest extent on their sole domestic industrial capabilities to fulfil the needs of their national civil and defence Space programmes. Worldwide, the Space market cannot be considered as an open business, and the commercial market, where European industry has been very successful so far, represents just a fraction of the total.
Therefore, all efforts shall be made to level the playing field with worldwide competitors. In this respect, opening the European market shall be conditioned to reciprocity measures to ensure an open and fair access of the European industry to non-European institutional markets. This should include the preferred use of existing and future European Space assets such as launch services, Space constellations, etc…
Moreover, such procurement policies should build on the outcome of the ongoing R&T harmonisation process undertaken by ESA and member States and integrate measures in favour of a greater involvement of SMEs in the development of services, accounting for the additional difficulty for small companies to overcome the technological barrier in Space hardware development and qualification. However, such measures should not be limited to encouraging newcomers, which in some areas just leads to overcapacity.
The European Space Industry definitely supports European-wide open and fair competition for the awarding of public contracts, whenever it is feasible and can be based on sound industrial capabilities. The European Space programmes should meet Union’s expectations and Policies objectives while enhancing European industry international competitiveness, growth and sustainability (according to Europe2020 objectives).
Based on such principles, ESA and Union procurement policies, although different by nature, should at least be compatible and serve common purposes.
In the name of the European Space industry community, Eurospace is looking forward to being involved and contributing to the upcoming reflections in these matters.
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