SUBCOMMITTEE ON SPACE SCIENCE AND APPLICATIONS HEARING ON SPACE COMMERCIALIZATION ROOM 2318 9:30 A.M. - 12:00 NOON. WITNESS LIST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B00181R001701610008-7
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 18
• Document Creation Date: December 27, 2016
• Document Release Date: February 24, 2012
• Sequence Number: 8
• Publication Date: May 3, 1983
• Content Type: MISC

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COMMITTEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRES=`.TATIVES
WASHINGTON, D.C. 20515
SUBCOMMITTEE ON SPACE SC I EK CE A.;D APPLICATIONS
Hearing on
Space Commercialization
Room 2318; 9:30 a.m. - 12:00 noon
May 3, 1983
TNESS LIST
Mr. Philip M. Klutznick
Senior Managing Partner
Klutznick Investments
875 North Michigan Avenue
Chicago, Illinois 60611
accompanied by:
Mr. Mitchell Rogovin
Senior Partner
Rogov i n, Huge and Lenzner
1730 Rhode Island Avenue, N.11.
Washington, D. C. 20036
Mr. Gerald J. t,ossi;ghoff
Commissioner of Patents
Department of Comrerce
Washington, D. C. 20231
Hon. James Beggs
Administrator
National Aeronautics and
Space Administration
Washington, D.C. 20545
Mr. Daniel J. Fink, Chairman
NASA Advisory Council
D.J. Fink Associates, inc.
1901 North Fort Myer Drive
Arlington, Virginia 22239
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Testimony of Philip M. Klutz-nick
Chairman
National Academy of Public Administration Panel
on
Encouraging Business Ventures in Space Technologies
before the
Committee on Science and Technology
U.S. House of Representatives
May 3, 1983
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Mr. Chairman and Members of the Subcommittee:
It is a privilege to appear before you today as Chairman of the National
Academy of Public Administration Panel on Encouraging Business Ventures in
Space Technologies. This Panel was formed in response to a request from the
Administrator of the National Aeronautics and Space Administration (NASA) to
study and recommend policies and approaches designed to facilitate private sector
involvement and investment in commercial activities in space. Joining with me
today are fellow Panel members Vice Chairman Mitchell Rogovin, and Gerald
Mossinghoff. Also at this time I would like to acknowledge the contributions of
our other Panel members: Stover Babcock, Richard Bolt, Samuel Cohn, Emilio
Daddario, Harold Finger, Peter Goldmark, John Johnson, and Thomas Paine.
(Biographic data are attached.)
Mr. Chairman, with your permission I submit for the hearing record a
complete copy of the Panel's report which was presented to the Administrator on
May 2, 1983. I will make some brief observations. I suggest that an opportunity be
provided for my colleagues to comment. Thereafter, we are prepared to respond
to your questions.
The United States has been in the space business for approximately twenty-
five years. During this period the nation has developed a comprehensive space
research and technology base in government, in industry and in our universities.
Our total capabilities have been demonstrated in manned Apollo missions to the
moon, in unmanned science missions to the planets and in meteorological,
communications and other applications satellite technologies. Except for the
commercial satellite communications industry which establisher) itself after initial-
NASA R&D efforts, U.S. activities in space have been characterized almost
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exclusively by government objectives and government funding. In recent months,
however, there has been an upsurge of interest in the private sector in commercial
space ventures. This is evidenced by various proposals submitted to NASA and by
several ventures initiated independent of NASA. We cannot catalogue all the
reasons for this private sector interest in space activity; it may be due in part to
the advent of the space shuttle with its successful flight program offering a new
and unique capability to use and explore the space environment, or it may result
from an increasing awareness of profitable opportunities in and the importance of
high technology enterprises. This interest has parallels abroad, particularly in
Japan, France and Germany.
On the eve of this hearing, the April 19th issue of the New York Times
carried a front page story in its "Business Day" section regarding the formation of
the Orbital Systems Corporation by three young men 30 years of age and
younger. It is stated that they borrowed their capital from banks, private
investors and financial institutions, including the Space Foundation of Houston.
These entreprenuers announced that they had "negotiated a deal with NASA to
develop and market a privately financed propulsion system to boost
communications satellites and other payloads from the space shuttle's low orbit to
higher altitudes."
Mr. Chairman, it is too early to forecast the degree of success private
ventures in space technology will achieve. Communications satellites represent a
major growth industry. At this time this industry is the principal example of a
successful commercial application of space technology. Nevertheless, its success
strongly supports the proposition that the nation should make a coordinated effort
to test the commercial potential of all space technologies and the space
environment. The Panel makes no predictions as to the total benefits that might
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accrue from a commercialization thrust. Such estimates would be accompanied
by great uncertainty. The Panel is convinced, however, that the space arena
should be carefully and thoroughly examined by the business community so that, as
a nation, we do not overlook an opportunity for economic benefit. Furthermore,
the involvement of the private sector is essential to maintain U.S. leadership in
space - - an explicit national objective set forth in the National Aeronautics and
Space Act of 1958. This objective was reaffirmed.. in the President's Space Policy
Statement released July 4, 1982.
NASA has been and for some time will continue to be the principal generator
of space technology. This role is a statutory obligation of the agency and one that
has been performed extremely well. In so doing, there has been created an
internal organizational philosophy and an external image that space is largely a
governmental function. If the United States is to pursue the economic potential
of space, NASA must play a key facilitating role - a role that is new to the
agency but complementary to its continuing statutory responsibilities. These
factors, lead to the Panel's recommendation that there must be a clear statement
of senior management commitment and a positive program in support of
commercialization as a policy compatible with the long-run future of NASA. This
statement should be disseminated widely within NASA, to industry and to the
general public.
The Panel believes that a commercialization role does not diminish the
NASA R&D role; it strengthens it and provides additional challenges. NASA is the
basic source of space technology, space systems, and knowledge of the space
environment, all of. which are essential to support commercial endeavors in
space. While industry excels in exploiting and marketing current technology, it
often does not have the resources to undertake the high risk, long term advanced
Y
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developments necessary to maintain a leadership posture in an increasingly
competitive international market. A case in point is the advanced satellite
communications program in the NASA FY-1984 budget request. The Panel
believes that the continuing R&D role for NASA is vital if we are to identify new
opportunities such as may exist in materials processing in space (MPS). For
example, the NASA/McDonnell Douglas/Johnson and Johnson joint endeavor in
electrophoresis, an experiment on the STS-6 flight, is based upon initial research
performed by NASA. MPS appears to hold a large potential for economic
benefit. The Panel recommends that NASA give more attention to this activity.
In addition, Mr. Chairman, there are major facilities, perhaps best
exemplified by the development of the space shuttle, that are multi-user, very
expensive and technically complex, and that are critical to utilization of the space
environment. These developments transcend the capabilities and needs of
individual private sector firms. The Panel believes we should apply national
facility precedents from the NASA aeronautical wind tunnel program to the
development, utilization and operation of major facilities in space. We view the
NASA R&D role and a concurrent commercialization thrust in the agency as
mutually supportive for national goals and for economic benefit. The validity of
this view is evidenced by the recognized benefits accruing from extensive
NASA/industry collaboration in aeronautical research activities.
Most space endeavors are recognized as high risk, expensive and long lead
time activities. These factors must be addressed if the private sector is to
become involved. Technical risk can he reduced to more manageable levels
through continuing NASA R&D activities that pursue new initiatives through
technology demonstration. The expense of experimentation in the space.
environment can be reduced through the use of the joint endeavor agreement.
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Also, NASA works closely with the insurance industry to assure available
coverages for risk taking. The Panel notes the NASA awareness of these
inhibiting factors and that the agency has taken positive steps to address them.
Such affirmative efforts have to be made continously. Finally, stability,
consistency and continuity of policy are essential to promote business enterprise.
NASA's commercialization policies must recognize the importance of these
factors and the agency must strive to minimize disruptions.
Perhaps the most difficult chore the Panel has identified to NASA is
educating industry in space technologies and encouraging industry participation in
commercial initiatives. Industry,particularly non-aerospace companies that daily
produce goods and services .for domestic and international markets, has to be
made aware of the potential of space technology. Many of these firms will be
exposed for the first time to the technological sophistication of space endeavors.
NASA has developed innovative mechanisms - the industrial guest investigator
program (IGI) and the technical exchange agreement (TEA) to address this need.
Early familiarity with NASA R&D projects enables initial assessments of
commercial potentials and enhances planning for eventual commercial
applications. The Panel considers the IGI and TEA as effective approaches to this
problem and their use should be expanded. In addition to these mechanisms at the
technical level, :t is also necessary to begin a dialogue with those industry
management personnel with responsibility for strategic business planning.
Mr. Chairman, organization for the commercialization activity is vital to
achieving success. NASA has a challenging problem because of its program office
structure and its appropriate concentration on scientific and technical
objectives. This structure has been splendidly effective in producing the many.
NASA accomplishments. However, the Panel found a large amount of
r_
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fragmentation of present commercialization activities within the agency that are
counterproductive. In fact, many outsiders, and some NASA personnel, do not
know where to go to discuss commercial endeavors. Therefore, the panel
recommends the establishment of a well defined focus of responsibility at a high
level in NASA to address the commercialization role. The report identifies
functions associated with this responsibility. Implicit in our recommendation,
however, is a low key approach; we are not suggesting a major reorganization of
NASA. Rather we believe it is important to clearly establish the focal point and
then gradually pull together appropriate organizational elements, building a
cohesive unit as the agency moves ahead with its commercialization role. The
Panel does stress the need for the leadership of this activity to have business
decision-making and marketplace experience.
In Section X of the report the Panel has provided guidelines for use in
processing proposals for commercial endeavors received by NASA. These were
formulated in response to a specific request from the agency.
A word of caution as I conclude, Mr. Chairman. The Panel floes not view its
recommendations as requiring a significant infusion of federal funds. Our
recommendations are to organize for a more efficient use of existing resources.
Commercialization will require a government/industry partnership approach in
which the private sector is expected to place capital at risk.
In addition to its homework, the Panel met on four occasions for a total of
six working days to discuss these matters. During three meetings, there was
extensive interaction with Mr. Beggs and senior NASA officials comprising a task
force appointed for this specific purpose. Accordingly, NASA top management is
quite familiar with our work and our recommendations. In one session, we met.
with seven entrepreneurs who are engaged in or are proposing business ventures in
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the commercialization of space technology to gain an understanding of their
problems and concerns.
Mr. Chairman, I have presented a summary of the highlights of our
activity. In the event I have overlooked any significant points during this brief
presentation, after my colleagues have expressed their views we would be pleased
to try to respond to any questions.
Thank you.
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Statement of
James M. Beggs
Administrator
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
before the
Subcommittee on Space Science and Applications
Committee on Science and Technology
House of Representatives
Mr. Chairman and Members of the Subcommittee:
Mr. Chairman, it is a special pleasure for me to
appear before this Subcommittee to participate in this
series of Hearings on commercial activities in space.
These Hearings represent asignificant milestone in
this Nation's space program. They are noteworthy in
that the question being addressed today is no longer
whether space has commercial promise but rather how
best to proceed to maximize that promise for national
economic well-being. In addition, they are timely
because of the substantial interest expressed in com-
mercialization by a number of. industries. I have felt
for some time that NASA should increase its attention
to encouraging private sector investment and operations
in space with the same quality of cooperation we, and
our predecessor organization, the National Advisory
Committee for Aeronautics, have achieved with the
aeronautical interests in this country.
Shortly after the release of the President's
July 4, 1982, National Space Policy Statement, which,
in part, calls for the encouragement of domestic
commercial exploitation of space capabilities, I asked
the National Academy of Public Administration to
undertake a study and make recommendations as to how
best to engage the creative skills and entrepreneural
initiative of the Nation's private sector in the
commercialization of space. At the same time, I asked
the Academy to examine the proper role of NASA in this
arena.
Before giving you my observations on the Academy
report, I would like to first express my deep apprecia-
tion to the Academy and in particular to Mr. Klutznick
and other members of the Academy Panel who undertook
this challenging task and did it so well.
The guidelines and recommendations formulated by
the Panel were requested,by NASA to help us deal effec-
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2
tively and properly with the various initiatives pre-
ented to us by industry. During the course of the
study, the panel had a number of meetings with NASA
management and with representatives from the industry
who have expressed an interest in the commercial possi-
bilities of space activities. I have discussed the
observations and recommendations reached during the
study with the panel members during the course of the
study. I also expect the guidelines will be helpful to
business firms contemplating a space endeavor.
Mr. Chairman, a clear message from the Academy
report is that the United States, after years of build-
ing a technology base second to none, should not fail
to examine fully the potential for commercial enter-
prise in space. A second message is the need for
government/industry cooperation to make this happen. I
fully agree with these views.
The Panel recognizes NASA's statutory role in
research and development and the importance of NASA R&D
to many commercial endeavors in space. The question we
must ask ourselves is how we can most effectively
continue this role and develop the'right environment to
support commercial potentials.
Mr. Chairman, the Panel has pointed out the many
space endeavors by their very nature are high risk,
expensive and long lead time activities. Stability,
consistency, and continuity in policies are beneficial
to business decisions. As a former member of that
business community I am keenly aware of the
significance of stability in policy. From my present
position in the government I am equally aware of the
difficulty in assuring that long-lead stability. In
our relationships with industry and in formulating our
policies we must seek ways to provide reasonable
assurances and to be prepared to participate in a
positive way in those areas impacting commercialization
where other organizations are involved.
Commercialization is not new to NASA. The
satellite communications industry grew out of early
work by NASA. The spinning upper stages used in the
Shuttle were developed under a joint agreement between
NASA and McDonnell Douglas Corporation. Our experience
has clearly been limited, 'however. Today the items we
have been discussing represent quite a menu of oppor-
tunities in many different types of initiatives. We
have started to develop criteria by which to evaluate
these new ideas, to develop a proper government re-
sponse to proposals, and to examine management and
organizational approaches to assuring that the respon-
sibilities of the government are properly carried out.
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We also recognize the general unfamiliarity of the
non-aerospace industry with space technology and space
environment, and the importance of NASA facilities and
associated hardware to the utilization of the space
environment. We have taken an initial step through
the Joint Endeavor Agreement approach to reduce the
cost of using the Space Shuttle encouraging "path
breaking" uses of space for commercial product research
and experimentation purposes. We will look at our wind
tunnel policies to determine what we can adapt from
these policies regarding the use of other NASA facili-
ties and hardware so as to facilitate and enhance the
value of these facilities for U.S. industrial research
activities.
NASA has made a start, as noted by the Panel, with
Joint Endeavor Agreements and other cooperative ar-
rangements to establish a two-way street with industry
to identify potential opportunities, to expose our
people to industry interests and requirements, and to
provide appropriate support to commercial ventures. We
agree with the importance of developing this relation-
ship with industry and will seek ways to enhance the
process.
We must, however, proceed with caution as we enter
into this relatively-new arena. Although I have indi-
cated, I wholeheartedly believe that the time has come
to encourage expansion of commercial involvement in
space activities, it is imperative that we develop
sound guidelines to define the Government's role in
this process. We cannot ignore the fact that the
American taxpayer has invested many billions of
dollars in the knowledge and capability represented by
today's space program. Nor can we proceed in ways
which jeopardize the commitments and obligations that
the government has in space programs -- commitments
that derive from the long legislative history within
which NASA operates. We must also deal with these
issues in a balanced manner which assures adequate
opportunity for all reasonable approaches by the
private sector providing those approaches comply with
a sound and logical set of guidelines. We are, in
taking these steps, establishing precedents which
could profoundly affect the civil space program in
years to come. We must face the challenge in a way
which will assure that the best use is made of the
opportunity which it represents.
Finally, let me address a major issue now facing
the Agency - the commercialization of expendable launch
vehicles. Various proposals have been made to operate
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the Delta, Atlas-Centaur, and Titan vehicles on a
commercial basis as well as to introduce new ELVs. We
have reviewed this issue within NASA and have partici-
pated in the Senior Interagency Group (Space) study.
These reviews will be concluded later this month. Many
issues must be considered in the decision to commer-
cialize ELVs, including: national security considera-
tions, and issues associated with the use of national
launch facilities. While I cannot, at this point,
state what the outcome of these studies will be with
respect to ELV commercialization, I see no reason, from
a national policy standpoint, why such an activity
cannot go forward.
Mr. Chairman, these are my views regarding the
Academy study and our intentions regarding the imple-
mentation of its recommendations. I will be pleased to
respond to your questions.
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May 3, 1983
STATEMENT OF
DANIEL J. FINK
before the
SUBCOMMITTEE ON SPACE SCIENCE AND APPLICATIONS
COMMITTEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
Mr. Chairman and members of. the Committee: It is a great
personal pleasure for me. to appear before this distinguished
Subcommittee to comment on the commercialization of space and the
role of the private and public sectors. The subject is important,
timely, and one that I have been personally interested in for a
number of years. My comments today_are based on my understanding
of past commercialization efforts, both from my own participation
and from observations of the successes (and some failures) of
others. While I currently chair the NASA Advisory Council, these
views do not necessarily represent the Council, which has not
specifically addressed this issue and therefore takes no
position. On the other hand, we do have presently underway two
Task Forces, one dealing with the future missions of NASA and the
other with Shuttle utilization. Both may touch on some aspects
of the subject at hand. When completed, this work will certainly
be available to the Subcommittee.
The National Academy of Public Administration (NAPA) report
is an excellent baseline on which to initiate these hearings. It
recognizes a number of factors which I believe bear repetition.
First, that we in this country have perhaps a unique opportunity
to maintain our leadership in space if we can truly tap the
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additional contributions that can be made by the private sector.
Second, that many facilitating steps must occur to make this
happen. Third, that in the foreseeable future private space
ventures will not be laissez faire activities; the government
will interact on many levels. Finally, the report emphasizes the
unique-role the government must continue to play in advancing the
state of the art and in carrying out the longer,term and more
ambitious endeavors which will be required to continue our
international space leadership.
In short, like other thoughtful treatments of the subject, it
discusses a blend of free enterprise and public/private
cooperation that is not the norm in our way of doing business.
In the time available to me I'd like to,make just a few
additional and perhaps amplifying points.
To me free enterprise implies both the element of choice on
the part of the private sector and the expectation that they will
take the initiative in trading risk for reward. I would call
that private initiative,, as it applies to space endeavors,
"commercialization pull." When we have it, success normally
follows closely in its wake. The first commercial proposition
for a communications satellite appeared in 1961. No undue
prodding by the government was required. Rather, the government
responded admirably to that commercial suction. Contrast this
with remote sensing, where commercialization "push" by some parts
of the government started, as I recall, in the mid-70s. I
believe such commercialization "push" can be counterproductive to
the progress we all want to see made. It certainly has been
frustrating to the Congress. Some elements of the government
behave as though their statements on commercialization are now
fact, expecting the private sector to rush in and fill the
breech. This has yet to happen because the interested private
parties see the government as the principal customer for the
product, but this customer makes no quantitative commitment to
this fact. Perhaps we should recognize that, when the government
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is the principal or sole customer for a product or service,
commercialization may offer some private sector efficiencies but
it is really not the entrepreneurial engine that we all look to
for expansion of our space endeavors. At times it may be little
more than an alternate form of contracting or funding and should
be recognized as such.
I would rather that we concentrated our attention on those
areas more representative of free enterprise where there is
commercialization "pull"; i.e., where the private sector is
initiating activity and the government is gearing to respond.
This is now happening in launch vehicles and launch services and
I hope will be increasingly evident in materials processing in
space as initial successes are publicized and understood. There
seems to be little argument-that such commercialization is a good
thing and should be encouraged. But verbal encouragement and
pats on the back are not enough. Positive statements and
policies issued at high levels, while important, are not
sufficient. As a recent corporate strategic planner, I know that
the best plan is worthless if it lacks an implementation program.
Healthy industries have competing demands for their investment
dollars. Those opportunities with unresolved uncertainties and
risks that are seemingly not controllable will simply be
sacrificed for those with a more certain return. It is not that
industry will not take risks, but far better the business risk
that. intelligent application of their own effort and capital
might ameliorate than the risk of a government, no matter how
well intended, changing its mind.
It is therefore vitally important that the policies now being
developed to encourage commercialization be translated into
actionable events by officials responsible for implementation.
This is not a trivial statement because often these officials are
many layers from the Agency heads and are more used to the
adversary contractual process than the cooperative efforts now
demanded. Perhaps if we were operating in an international
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vacuum this wouldn't be so important. But this Subcommittee
needs little reminder of the overseas competition that has now
extended into the space arena nor of the strength of governments
and industries working together.
It is not my intent to develop a-complete list of
uncertainties that will need resolution, but included should be
questions of government restraints on access to the market;
controls on pricing, if any; and a much better understanding of
the implications of national security overrides and their
sensitivity to policy changes. There may be need for restraints
on the government which proscribe them from future competition
with the private entity and limit international agreements which
create overseas competition. The costs of regulation must be
understood and, most import&nt,-early negotiations are required
on the costs of government facilities and services needed by the
private sector with some guarantee of their stability over time.
Other implementation requirements are included in the NAPA
report, including rights in inventions, insurance, etc. If these
issues are handled in a business-like manner, I am very
optimistic that there will be increasing private involvement in
space activities, particularly where there is already
commercialization pull, such as in the provision of launch
services through expendable launch vehicles (ELVs).-
We must also recognize the implications this will have for
the space transportation system and the manner in,which the
Shuttle is used. The NAPA report recommends against commercial
operation of the Shuttle at this time because, in their view, it
has not yet attained technical maturity. There is another reason
for not rushing into Shuttle commercialization. If the
commercial ELVs are successful, then by definition there will be
some unloading of the Shuttle manifest. Rather than being
discouraged by this event, I would be encouraged by the impetus
this should give to both military and civilian use of the Shuttle
in research and development. In my view such use has been ..
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inhibited because any R & D planner looking ahead could see the
Shuttle fully utilized as a space truck with no U.S. alternative
to Shuttle launching. He further faced the recognition that
priority must be given to maintaining the military and commercial
schedules with little room for far-reaching programs that might
use the unique properties of the Shuttle: its size, the use of
man, End its servicing and retrieving capabilities. This then is
another reason for not prematurely commercializing Shuttle
operations. It has too many other values to the nation.
In summary, Mr. Chairman, I believe the United States has a
unique opportunity to extend its leadership in space technology,
science, exploration and applications through proper exploitation
of government responsibilites and private sector initiatives.
Clearly the public policies are moving in this direction. My
principle caution is that we recognize the complexity of the path
on which we are embarking; that policy statements, while
required, are not sufficient for success and that much attention
must be paid by all parties, private and public, in implementing
the policies if we are to succeed. The importance of this
endeavor to our nation is admirably expressed in the closing
paragraph of the NAPA report foreword:
At a time when our nation has suffered losses in
areas of technological creativity where it was once the
undisputed leader, the space program has provided a
compensating stimulant, the tempo of which must not be
lost. The prospect for business ventures in space
technologies represents a major opportunity to
demonstrate that within the free enterprise philosophy
there is a great potential for cooperative endeavor
between the public and private sector. Pursuit of this
opportunity could become a model for joint
public/private efforts in other areas.
Thank you, Mr. Chairman.
Declassified and Approved For Release 2012/02/28: CIA-RDP92B00181 R001701610008-7