Main Engine Cut Off - T+236: SpaceX Starshield, NSSL Phase 3

Starting point is 00:00:00 Hello and welcome to Main Engine Cutoff, I am Anthony Colangelo. I want to talk today about a recent, I would call it an announcement, but there really wasn't much of an announcement from SpaceX about a new line of satellites called Starshield. And that led me into some thinking about acquisitions in the military industrial complex space, which led me to think about the National Security Space Launch Program, that we should have some news on phase three of that program coming up in the new year. So just wanted to talk a couple of thoughts about it that have been bouncing around my head in kind of an ill-formed way for a couple of months, but felt like it might be a good time to put that stuff

Starting point is 00:00:48 out there, knowing that we'll have some news on this front in just a couple of months. So to start with this Starshield announcement from SpaceX, they put up this page at spacex.com slash starshield a week or two back, and really haven't given out any other details aside from that. So very heavy on the marketing, light on the details, really haven't talked about it at all in any regard that I've seen. So it's quite intriguing. And what this is, is essentially an upgraded version of Starlink buses specifically targeted at the national security space. So they talk specifically about payloads such as earth observation, communications, hosted payloads on board of these satellite buses. The idea being these satellite buses are configurable,

Starting point is 00:01:29 modular to whatever the mission may be, has higher level security than a typical Starlink satellite, potentially has some new ground systems that would hook in with that. All in all, it would be a more robust version of what they're doing with Starlink specifically for military uses. Starlink has had great success over the last couple of years, and specifically on the military side, it's been very helpful in Ukraine. It has been resilient against jamming, and more so than I think a lot of people thought it would be, and showed the strength of this kind of architecture. would be, and showed the strength of this kind of architecture. And of course, the Department of Defense has been working on that constellation style architecture through the Space Development Agency's work that SpaceX does have a hand in. So it's not completely off the grid for the DoD to be considering this kind of thing. But this is again, SpaceX using their vertical integration to really

Starting point is 00:02:22 double down on what they're doing well and be a full, you know, soup to nuts solution for a sector of the market. They can build their own spacecraft, they can launch it on their own vehicles, they can build their own payloads, communications payloads on board. They have these laser cross links, which is a huge part of this announcement that we'll talk about in a second. And they can provide services for some government agencies from start to finish in a completely secure way and they see a line of business there that they can go after. Now in terms of actually selling Starshield as a product, this is kind of a mystery to me exactly how they foresee this going

Starting point is 00:02:59 down because most government acquisitions are not done in at least least here in the US, in a way where an agency just goes shopping for something like a satellite bus, right? They usually constellation acquisition. They have a couple of different aspects of the constellation they're building. They have one called the transport layer, that is the communications layer of their system. And then they have one called the tracking layer, which is missile warning and tracking satellites that they put out for bid as well. There are multiple different rounds of these that they're going to be building out. So the first round, Tranche Zero, has 28 satellites total, 20 of them being transport, eight of them being tracking. And SpaceX actually has a contract for four of those tracking satellites that they won back in October of 2020. They won about $150 million for four of those satellites. And the thought being that those satellites are basically

Starting point is 00:04:06 what they're building here with Starshield, or maybe the inverse is correct, that they were building that for those tracking satellites, and they're commercializing it by way of Starshield. But in that kind of program, SpaceX had to reply to the Space Development Agency's RFP and say, here's what we can do, here's the contract terms that we would need, here's the budget that we would need for these things, here's the requirements or how we adhere to those requirements, here's our proposal. And then the SDA had to select them officially, right? So it wasn't like the SDA wandered onto the SpaceX website and was like, oh, these are good satellites, I'll buy some of these. It was that much more, you know, government style acquisition. Now, this could be just,

Starting point is 00:04:44 you know, SpaceX seeing that they're, they have this work going on for the DoD already. And they, they see there's a market for either other agencies within the US government that might not need to do the same kind of process and could go out and buy some sort of satellite bus for their own use. And, or it could be that they're looking to the other international partners out there. I don't, because again, there's not a lot of details released about Star Shield and exactly how it would work. It could be that they could sell this kind of service to, you know, friendly governments, certainly like the Five Eyes nations or governments that the US is very close to. So, you know, maybe the UK wants to have some new military communication satellites,

Starting point is 00:05:23 they could buy a couple of Star Shields, you know, that kind of thing could be possible depending on exactly what star shield contains and what they're able to get through, you know, international regulations and all that kind of stuff. So I'm a little bit mystified by exactly what the strategy is here, in terms of is this actively, is this just a thing they can point to when they're actively going out and selling to other government agencies? Is this something they're hoping to just put this out and see if anyone contacts them about, you know, maybe they have a way of acquiring them for their government agency? Or is this some sort of lobbying effort as, you know, we see programs like the SDA constellation get funding through Congress or be talked

Starting point is 00:06:06 about within political circles, SpaceX can say, yeah, look, we can do this whole thing commercially based on what we have in Starlink right now. And is this just straight up lobbying? I think it's yet to be seen exactly what this has in common with Starlink. Are these just Starlink-derived buses that operate entirely on their own? Do they integrate with the Starlink network for communications? Some of the missions that StarShield is said to, you know,

Starting point is 00:06:33 take part of is kind of at odds, right? So they talk about Earth observation. Does that mean high-resolution Earth imaging? And if so, can you do that simultaneously while providing communications? Or is this more of a thing, you know, with the precise pointing that you would need for high resolution imaging, you probably can't concurrently do high resolution imaging and high bandwidth communications. they've talked about through interviews over the last 10 years is someone on the ground somewhere being able to order satellite imagery real time and have it delivered right to their terminal. That is something that's totally plausible with the use of Starlink, the way that SpaceX has their system set up right now, that they would have an imaging payload on board one of these

Starting point is 00:07:18 satellites, take an image, send it directly to a user terminal, or pass it through the Starlink network to get it to that person wherever they are in the world. That's totally plausible as a fully SpaceX solution. So maybe that's the way they're looking at StarShield. And they're trying to market this towards, you know, the army or something like that, that's interested in that kind of real time imagery on the ground. Now, we know SpaceX has sent up a couple of tech demonstration satellites. There's evidence that four to eight of these are up on orbit right now. They all got USA designations, which are the classified name. I'm curious what goes into actually getting one of those names and not being an unclassified payload. Did they have an agreement

Starting point is 00:07:56 in place with some government agency to fly some of these platforms? Is it part of the SDA contract? Is it part of something else that we don't know about? You know, that's interesting. I don't think you can just apply for a, I want to be a classified satellite. Like, I don't know if there's an intake form for that. So that's curious on its own that SpaceX has that right now with some Starshield payloads on orbit. But the last piece I want to talk about with Starshield is a comment that they make on the site about interoperability. I'm just going to read a little section from the site here. Starlink's inter-satellite laser communications terminal, which is the only communications laser operating at scale in orbit today,

Starting point is 00:08:32 can be integrated onto partner satellites to enable incorporation into the Starshield network. Now, this hits on a topic that I've seen come up a couple of times over the last few months, where there's officials from the Department of Defense that talk about how Starlink is very great, it's very resilient, it's really useful, but it is so proprietary that it doesn't work with these other systems that are coming online in the near future, specifically that Space Development Agency Constellation. Those are all going to be built by different companies, right? There's five, I think, different companies that are already contracted with the SDA to build different parts of the network, but all of them have to use laser links that work together so

Starting point is 00:09:10 that no matter who built which satellite or who built which laser link payload, everything can talk together as a unified set. Starlink was the one that they were pointing to and saying, that one exists and we'd love to take advantage of that, but it's proprietary. We don't have any way of interoperating with that. So this is SpaceX saying, okay, great. We will sell our, at least the way this is worded, we will sell our laser communications terminals to others that can integrate them on their own satellites and then hook in to our network. This isn't them saying the inverse, right? And I saw it reported as them saying the inverse, that theirs would work with others. It doesn't say that in the text on the website, and the website's all we got right

Starting point is 00:09:47 now. So unless that's just a detail that they're leaving off, and it actually does exist, that doesn't seem to be the case. What they are saying is, we will sell you these very expensive laser terminals to put on your own satellites, and then you can work with the biggest communications network that's operating in space today. That part seems to be the real sales opportunity here. You know, maybe they sell a couple satellite buses to some government agencies, but can they sell hundreds or thousands of laser terminals, which are very expensive, probably the most expensive component on a Starlink satellite? Can they sell thousands of those to every satellite maker that wants to hook into Starlink and Starshield, that seems like the

Starting point is 00:10:26 real sales opportunity here. So we'll see how this plays out and exactly how Starshield comes up in conversation over the next couple of months or years. And if we ever hear about, you know, Starlink terminals or laser terminals being bought and integrated elsewhere, but that is the one that really caught my interest and something that I'm going to track pretty closely here. All right, as I said, I want to keep this military acquisition themed. So I want to talk about some National Security Space Launch Phase 3 thoughts. But before I do that, I want to say thank you to everyone out there who supports Main Engine Cutoff over at mainenginecutoff.com slash support. There are 857 of you supporting the show every single month,

Starting point is 00:11:03 and that includes 42 executive producers. Thanks to Simon, Chris, Pat, Matt, George, Ryan, Donald, Lee, Chris, Warren, Bob, Russell, Moritz, Joel, Jan, David, Eunice, Rob, Tim Dodd, the Everett Astronaut, Frank, Julian, Lars from Agile Space, Matt, the Astrogators at SCE, Chris, Fred, Heymanth, Don, Aerospace, Andrew Harrison, Benjamin, SmallSpark Space Systems systems tyler steve and seven anonymous executive producers if you want to help join that crew support managing cutoff manage cutoff.com slash support is where to do it if you join at three dollars a month or more you get access to headlines which is a show i do every week to 10 days running through all the stories of the week and keeping you up to date on everything going on in space and little fun fact if you do pay for headlines you would have heard my starshield take about 10 days ago when I did an episode of headlines that included some starshield take. And I ruminated on a little bit more and finally did a full show about it. But you'd have a little advanced hot take from me if you were up on the

Starting point is 00:11:58 headlines feed. So if you like this show, and you want to help support, that's a great way to stay up on space news, support the show. And I thank you all so much for the support. All right, so the National Security Space Launch Program, we're currently in phase two, that is the launch contracts that we're seeing SpaceX and ULA carry out from now over the next couple of years, right? Vulcan will have a couple of these missions coming up. A couple of them will fly on Atlas 5 before Vulcan comes online. SpaceX has started to launch some of these as well. There's a couple years left on the Phase 2 contract. And the way that that was awarded was the Space Force selected those two providers,

Starting point is 00:12:34 ULA and SpaceX, and assigned them a certain amount of missions up front, right? And it was 60-40% split of a certain amount of missions. So they knew that they had that many flights coming up over the next couple of years. There has been major talk that phase three will be or could be done differently than that phase two and phase one A was much like phase two was done. So I wanted to just talk about a couple options that I could see in the way that the launch industry is going. Because, you know, the real intent of this is to acquire reliable launch services for the U.S. military and do so in a way that maintains the things that the military needs to exist, right?

Starting point is 00:13:16 So in past instances, it had been, you know, maintaining launchers of the size of like Delta IV Heavy, Falcon Heavy, stuff that's a unique subset of the market that the military has a vested interest in sticking around, right? Back in the old days when it was just ULA, there was a whole arrangement that kept them operating so that the military could rely on those things existing. That has shifted as the launch industry has shifted, meaning, you know, there's a launch industry now. There's a commercial launch industry that is very healthy. There are commercial launchers that are of increasing sizes available, decreasing sizes available as well. Things are bifurcating a bit. The industry is in a different place today considering Phase 3 than it was when the Phase 1A strategy was figured out, whatever it was, 10 years ago or more than that, I guess. So, there's a couple different potential options.

Starting point is 00:14:24 Number one that I've seen mentioned a few times is that the Space Force might change the requirements around this to be not just traditional launch services from Earth to orbit, but also in-space transportation services. That's something that they floated maybe a year ago or something like that. And they're trying to get some thoughts on that before they would put out a draft request for proposals in February of 2023 is the earliest date I've seen for that. But they got to get some information on if that kind of thing would resonate with the industry before they put it into their draft and release that in February. The idea would be to eventually award these contracts in 2024, whatever that may mean based on how this is all structured. So that twist from traditional launch services to in-space transportation as well is one thing. And the other is maybe they don't do this strategy where they choose two providers and they sign a bunch of flights up front to those providers. They could structure this in a way

Starting point is 00:15:12 that is task order based. And we've seen this in a couple of different instances, right? The most talked about one of late has been NASA's Commercial Lunar Payload Services program, where they on-ramp a bunch of competitors, and then they don't assign any missions to those competitors up front, but what they do is they put out task orders for different missions, and those competitors bid on each mission individually. They give them a price and all the other reply requirements that they have, and then the Space Force would choose a winner for that particular task order of that launch. There is precedent for this in the launch side. So on the smaller launch end of the spectrum, there's this OSP4 contract that was created in October 2019 and has now ramped up to 11

Starting point is 00:15:57 competitors. Just to rattle off the competitors real quick, AVUM, Firefly, Northrop Grumman, Rocket Lab, SpaceX, ULA, Vox Space, which is Virgin Orbit, Expo Launch, ABL, Astra, and Relativity. Those are the 11 that are part of that kind of contract. And those are for small launch acquisitions, right? I mentioned SpaceX and ULA, so they're quite big, but sometimes they fit in the small launch criteria if you're talking about rideshares or any other arrangements that they might have for those particular launches. But largely, those are vehicles that are one ton and less in the industry. And that's all task order based.

Starting point is 00:16:31 It has, I don't know, there's a couple of different ways that this has turned out from Clips to this OSP4 contract, right? And that's the part I want to dissect here, because I do think this would make sense for phase three, but I'm quite critical of it and how it's applied to commercial lunar payload services right now. So I have a hard time reconciling that in my own brain. And that's why I'm doing this episode of the podcast here. So in the case of commercial lunar payload services, I'm seeing this kind of race to

Starting point is 00:17:00 the bottom effect where NASA on-ramps competitors for commercial lunar landers, which have never existed. They still don't exist, but they're working on them. And then each one of those bids for task orders independently. And what we've seen is pricing that just keeps dropping, which is good overall, but it's not great if it's still in an industry that has yet, or sector of the industry that has yet to prove that it will exist and instead it is um taking the legitimate you know legitimate companies or i should say the companies that have a legitimate shot becoming you know major operators in space and it's putting them in a race to the bottom with companies that may have just started out and wrote down a price that the existing companies know like there's no way you would do would do a lunar mission for that amount of money, right? And that's led to some churn already in

Starting point is 00:17:49 the program. That initial company, Orbit Beyond, that was part of that CLPS program, they went under already. Mastin went bankrupt and sold to Astrobotic because they bid off more than they could chew in that mission. And there's some talk of even the companies that seem to be doing well with their contracts having trouble making the budgets work out for the budget that they bid, right? And that's the weird aspect of that, is that this is a brand new section of the market that has never existed before. Nobody really knew what it would cost up front.

Starting point is 00:18:23 We had some good estimates, but nobody really knew what it would cost to do this kind of service. And they still had to develop the vehicles from, you know, from scratch to carry out these task orders. And it required them finding other customers or other clients or other ways to fund the missions. That wasn't just, you know, a simple task order for a mission that they had very good constraints around in the way that something more defined and more existing like launch services, you know, can do. So that's where Clips seems to be struggling with the pressures there between task order based pricing and it being a new section of the industry that's developing still.

Starting point is 00:19:03 On the launch side, I feel like we're in a better spot with that, where launch services, like I said, is a big commercial market right now. The environment is very well known. The technical problem is very well understood. There is no shortage of new companies starting up, even without the existence of this program. And that's the strength right there. The fact that the industry does not need

Starting point is 00:19:24 phase three of the National Security Space Launch Program to be a task order based thing in order for the industry to exist. The industry will exist on its own. These competitors that would be possibly on ramp to something like phase three contracts, they are currently existing and currently either currently flying missions or, you know, in the late stages of build out and test of their vehicles. And, you know, they're not going to be surprised by the way their vehicle, well, they might be surprised by the way their vehicle operates, but they're not going to be surprised by the way that of how you operate a vehicle in the environment of launching from Earth to orbit. So I guess what I'm getting at is that without NASA's commercial lunar payload services program, the commercial lunar lander industry would not exist right now, right? It is purely dependent on the existence of NASA saying we're going to have a couple of missions per year going to the lunar surface. And that's awesome. That's really cool that NASA is playing a big part in

Starting point is 00:20:19 creating that section of the industry. But it also just creates weird influences in that section of the industry. If phase three never came about for the National Security Space Launch Program, and they just acquired launches on a bespoke basis, the way that they've done sometimes outside of these National Security Space Launch Programs, the industry wouldn't really notice. They would keep doing their thing. They'd keep trying to sell to these agencies, but it's not like an existential risk for this section of the industry. So for that reason, I do think it makes a lot more sense to push phase three in the direction of a task order based program. But I do think they also have to maintain some sanctity about which companies they onboard to that. You know, when I listed off that list of

Starting point is 00:21:05 small launch companies, Avum is the first one I listed, and they have a task order awarded to them through OSP4 right now. I have yet to hear really anything else from Avum after they pivoted to drone delivery a year and a half ago. I have no idea where they're at. They never have seemed realistic to me. I'm convinced they'll never fly that task order. So you have to be careful that, you know, some people say like, this is picking winners and losers. And it's like, yeah, it is to some extent. So you got to pick the right ones. And you've got to figure out the contracting method that allows you to maintain some sort of filter for realism. You know, maybe it's you're onboarded to phase three once you've flown a

Starting point is 00:21:45 launch. So we know that your service actually exists. And then you'd be eligible to bid for a task order. And that could work, right? That could work because task orders would come out every, you know, every couple months, there'd be a task order for some sort of mission. And so if you are able to start flying, you can then be onboarded to phase three, and you could be part of the next task order bid. The way it worked previously, you had to be able to win that contract upfront when phase two or phase one A was awarded and assure them that you could fly all the missions that you would be assigned. This one could on-ramp as you go and you could bid for the next task order. So even if New Glenn, for instance, was not flying by the time phase three

Starting point is 00:22:22 was awarded, which seems very likely right now, when they were to fly their first launch, make it the orbit, they could be on ramp to phase three, and they could be bidding for, you know, the fifth or sixth mission in phase three as a task order based thing. And that would allow them to maintain some sort of filter to who gets on that list. So that you do have some realism built in, and you don't have, you know, every other launch company coming up and saying, well, I meet these technical requirements to be on ramp. So then I can bid $10 and I'm being extreme here, but I can bid, you know, $20 million for a launch service that everyone else is bidding a hundred million for, uh, and, and create this race to the bottom effect that we're seeing elsewhere. So it's a tricky thing to get right, to, to maintain that list

Starting point is 00:23:03 and to do it in a legally defensible way to say that you're not just picking your favorites, but you need to be picking the ones that are realistic and will give you reliable service and predictable service. fully upstart or even with companies in the industry that are fully upstart until they are flying a vehicle. Now, if they start flying a vehicle and they're saying, we can fly this thing for $20 million, believe them, they're flying the vehicle. But if they've never flown a vehicle before, have never built a vehicle before, or their vehicle is based on some conceptual work, for instance, Spin Launch, Avum, like so many of these different companies that I'm just like, I don't know what's going on there. I don't think you can put the trust in them that, you know, 20 million is going to make sense for where they're at in their lifespan. The other thing that's going on here is the general stock of launch vehicles over the next five or 10 years, right? SpaceX is flying a ton right now, but most of it is Starlink.

Starting point is 00:24:00 Starship is yet to be seen exactly when that starts flying, how frequently, what kind of payload services they're going to have until they work out all their internal details, especially with regards to their human landing system. So that's a big variable in the industry right now. space launch program launches, and then they've got, you know, a billion Amazon launches to partake in. And really, Amazon bought, you know, most of the industry space available for the next several years. They bought a lot of New Glens, they bought a bunch of Vulcans, they bought, what, Ariane 6. I'm probably not remembering exactly how that all went down in terms of numbers, but they just signed this enormous launch deal that sucks up a lot of the available payload capacity on those launch vehicles. So from the Space Force perspective, they don't really know who's going to be available for what

Starting point is 00:24:56 kind of launch demand over the next couple of years. And to that end, Tory Bruno of ULA is openly lobbying for another block buy because they need to know how many launch vehicles to produce to fly those missions. And I'm not quite sure that that's the best decision for the Space Force to make. In the same vein that I was talking about before, knowing that these launch services exist and are reliable and dependable, bidding out a task order and seeing who's available for that launch opportunity of the competitors that you know that are actively operating seems like the best decision rather than deciding up front that, you know, we're going to

Starting point is 00:25:34 buy 20 Vulcans when we haven't seen exactly how Vulcan is going to operate yet or how well it's going to do or what kind of constraints they're going to have, or even honestly, what kind of constraints the Amazon deal is going to put on Vulcan. There's so many variables there that I just don't think the market is in the same spot that it was where it requires the Space Force to decide up front how many of which vehicle they're going to buy. And I think they can rely on the existence of this market, at least for the next five years, right? Longer term than that, there's chaos that could ensue. But, you know, right now, the Space Force needs the industry more than the industry needs the Space Force. And that hasn't always been the case. So I think when that gets into that

Starting point is 00:26:14 incentive structure, you can start being a little different in the way that you treat these launch providers. Now, there could still be some bespoke services that aren't really commercial things, right? We've seen this in the past with stuff like vertical integration that the Space Force wants to see in their different launch providers. But like nobody's on a commercial side going up to SpaceX and asking for vertical integration. They're doing it horizontally, just like the rest of the commercial market, because it's not a thing that really matters that much for who's flying on Falcon 9s right now. But the Space Force wants that. And it's okay if they have bespoke services, right? Like,

Starting point is 00:26:50 it's okay for the military to require weird custom services that isn't relevant to a commercial market. You know, that's how we get fighter jets. And it should be okay that there are fighter jets in the industry when there's also commercial airliners. That divergence is natural. And I think there's been a reaction against that over the past like 10 years to say like, no, everything must be done in the way that the commercial industry also likes. And I don't really buy that as much. But I think to the extent you can, then you have the ability to go out and say, we're going to do a task order based acquisition process rather than locking ourselves into competitors up front and being at the whim of wherever they're going with their roadmap. So again, we got the draft request

Starting point is 00:27:35 coming out in early 2023. We'll see exactly how this shakes out. I just wanted to get some thoughts out before I get influenced by, you know, the talk that will surely ramp up over the next couple of weeks as we get closer to that draft coming out. And I guess we'll talk more about it then. But for now, that's all I've got for you. Thanks again for your support, as always, at mainenginecutoff.com slash support. If you've got any questions or thoughts, hit me up on Twitter at wehavemiko or on email anthony at mainenginecutoff.com. And until next time, I'll talk to you soon.

Main Engine Cut Off - T+236: SpaceX Starshield, NSSL Phase 3

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