From: Wales.Larrison@ofa123.fidonet.org
Newsgroups: sci.space
Subject: commercial space news #20
Date: 23 Jan 93 15:17:42 GMT
X-Sender: newtout 0.06 Jan  3 1993


   This is number twenty in an irregular series on commercial space 
activities.  The commentaries included are my thoughts on these 
developments.  

   Continuing what seems to be a tradition for this column, the 
articles included in this issue are another mixed bag of topics.  If 
there's any unifying theme this month, it's the impact of government 
policies and interactions with commercial space ventures.  This 
column covers a couple of firms with government contract problems, a 
significant government market opportunity,  a government funded 
competitor for orbital return payloads, and a project currently 
caught in a government interagency political fight.   

CONTENTS:
1- OSC DEVELOPMENTS (BONDS, ORBCOMM, TURBO PEGASUS, CONTRACT WOES)
2- WESTAR LOOKING FOR NEW 'COMET' CUSTOMERS 
3- COMET COMPETITOR 'EXPRESS' GETS FUNDED 
4- NEW COMMERCIAL LAUNCH SITES - MOST STILL THINKING ABOUT IT 
5- NASA ANNOUNCES BLOCK BUY OF LAUNCHERS FOR EOS 
6- IRIDIUM NEGOTIATING WITH INVESTORS AND FOR PROTONS 
7- LOCKHEED TEAMING WITH KRUNICHEV ANNOUNCED 
8- IMI TEETERS ON BRINK 
9- RUSSIANS OFFER EX-ICBM TO SOUTH AFRICA AS LAUNCHER 
FINAL NOTES - 

ARTICLES
--------------------------------------------------------------------
1- OSC DEVELOPMENTS (BONDS, ORBCOMM, TURBO PEGASUS, CONTRACT  WOES)
   [This article briefly covers several recent developments with 
Orbital Sciences Corporation (OSC).]              
   In the early days of January, OSC filed with the Securities and 
Exchange Commission (SEC) to offer $55 M in convertible subordinated 
debentures ("bonds").  About $30 M from this sale are planned to be 
used by OSC to fund OSC's 'Orbcomm' satellite communications 
network, with the remainder of the proceeds to be used for R&D, to 
meet working capital needs, and to make necessary capital 
expenditures. The bond issue will be underwritten by Lehman Brothers 
and Alex. Brown & Sons Inc. 
   In related news regarding Orbcomm, OSC successfully completed a 
set of initial tests in Sep and Oct using prototype Orbcomm 
communicators.  The tests were performed using a SR-71 flying at 
80,000 ft over the California desert carrying a satellite relay 
simulator, and two versions of the handheld Orbcomm communicators on 
the ground.  The two versions were a full-featured VitalNet unit 
capable of sending and receiving E-mail type messages and data with 
a 7-line display screen, and a second unit designed to only 
demonstrate uplink of data for emergency, data acquisition, or data 
monitoring services.  The prototype communicators were designed and 
manufactured by Panasonic (Kyushu Matsushita Electric) of Japan, and 
are expected to cost from $50 to $350 when produced for an 
operational Orbcomm system. 
   With a new Pegasus launch attempt planned for late Jan, OSC has 
released plans to upgrade the existing Pegasus launcher with a 
turbojet-boosted version.  The "Pegasus Turbo" would add 2 turbojets 
under the triangular Pegasus wing to propel the rocket to Mach 4+ 
and more than 90,000 feet in altitude before they would be 
jettisoned.  Orbital claims the Pegasus Turbo would increase the 
Pegasus' reference performance to 2250 pounds into a 28 deg, 160 nmi 
circular orbit, or about a 125% increase.  The cost of the system is 
expected to increase by about 25-30% over the baseline Pegasus.  OSC 
is looking for industrial partners and a government sponsor before 
committing to the upgrade.  Assuming such partners could be found 
and initial design analyses prove out the concept, "Pegasus Turbo" 
could be available in 1995. 
   In mid-December, the US Strategic Defense Initiative Organization 
(SDIO) canceled its contract with OSC's Space Data Division for 3 
suborbital launch vehicles.  According to USAF Col. Rhip Worrell, 
the OSC launch vehicles had failed too many times, and could not 
provide on-time, reliable service for SDIO's needs.  When OSC's 
contract termination had been discussed between OSC and SDIO, OSC 
had asked for three months to perform $150,000 in technology demos 
and studies to prove that their launch vehicles can do the job.  
Worrell recommended against sticking with OSC for now, but told OSC 
the SDIO would look at their accomplishments in February if they 
performed the demonstration and study work with OSC funds. The  
contract cancellation is for about $ 28 M. 
   To replace OSC's launch systems, SDIO is will use a Lockheed 
suborbital rocket system for upcoming suborbital tests. Lockheed had 
been the primary competitor for the canceled OSC contract when it 
was first awarded, and recent Lockheed/Martin tests for SDIO have 
had a success rate of 93%, according to SDIO.  Worrell said "We have 
not had that [experience] with Space Data." Leftover equipment from 
the Exoatmospheric Reentry Interceptor System (ERIS) test program 
will be used. 
   [Commentary:  OSC is still seriously pursuing the Orbcomm 
network.  Issuing corporate bonds is a standard way of raising money 
for projects, and while OSC is not yet that large, their balance 
sheet has improved to the point they can take on this additional 
debt.  I would expect the bond issuance might provide sufficient 
funds to launch a prototype "Orbcomm" constellation (assuming they 
get FCC approval), but my calculation is $30 M will be sufficient to 
fund the Orbcomm project only for another year or so.  I don't think 
OSC wants to bring in a strategic partner with deep financial 
pockets for the space and launch segments of Orbcomm (since that 
would give up control where OSC's core strengths lie), but OSC needs 
to generate some significant funds to fund Orbcomm over the next 
several years.  Based upon other developments, OSC will have to work 
hard to generate these internal cash flows.  
   I haven't seen the "tombstone" ad announcing this bond issue yet, 
and I am rather curious about what interest rate and terms are being 
tendered.  While OSC's debt/equity ratio shouldn't be really out of 
line, other developments and a rather speculative market may force 
them to offer a slightly higher bond rate and slightly different 
terms than standard. 
   The successful Orbcomm test results were released just before the 
announcement of the bond issue, which is probably not coincidental, 
as good news about Orbcomm would help them in selling the bonds.  It 
is interesting that a SR-71 was used to simulate the Orbcomm 
satellite -- it probably was used to simulate the fairly rapid 
movement across the sky of the satellites in the Orbcomm LEO 
constellation as seen from the ground.  A high speed, high altitude 
aircraft would simulate satellite signal acquisition and 
transmission from a LEO satellite fairly well, but this is first 
time I know of when a SR-71 has been used for this. 
   Teaming with Matsushita for the ground segment brings in a deep 
pocketed strategic partner with expertise in large production run 
consumer electronics, which is not one of OSC's strengths. As 
mentioned previously, OSC still needs to find the funds to develop, 
build, and launch the space segment of the Orbcomm system.      
   As Pegasus moves back into operational status, OSC is again 
stating to look at further upgrades. Turbo jets basically add an 
additional first stage to Pegasus, using the high Isp of jet engines 
to increase the effective performance of the system.  It should be 
noted that OSC is looking for industrial partners (like a jet engine 
company) and government sponsor who desires the larger payload 
available before committing to the new configuration.   From my 
quick "back of the envelope" assessment, there shouldn't be any real 
technical problems with their approach, excepting the engine 
operation and jettison will add some complexity to the Pegasus 
launch cycle.  High supersonic flow dynamics can get a bit weird, 
and separation mechanics can be a bit tricky, but such problems have 
been solved on such systems as the SR-71.  Given enough funding to 
do a good design and test program, OSC should be able to work this 
out pretty quickly.  The new capability Turbo Pegasus should allow 
them to compete more effectively for the larger of the smallsat LEO 
constellations. 
   The contract cancellation by SDIO is much more problematic.  OSC 
makes about 35% of their revenues from suborbital launches, or about 
$60 M this year (estimating from quarterly data and last year's 
results).  Losing a $28 M suborbital services contract will hurt.  
Furthermore, the suborbital launch market has been one of the few 
established, solid market segments in OSC's portfolio of businesses 
and was expected to generating steady cash flows for OSC.  If OSC 
doesn't satisfy quality expectations by customers within this market 
area, and their cash flow decreases as customers move to other 
competitor's products, it is possible OSC's balance sheet may get 
hurt, just when they need money for Orbcomm and other ventures. 
   Industry rumors say quality in OSC's products has not been 
consistent, and several key customers are looking to move their 
business elsewhere.  Certainly OSC's products have been plagued by 
recent failures (Orbcomm-X, Pegasus, other suborbital launch 
problems, TOS data failure), but these problems can all be fixed.  
   To get back on track, OSC must fix their quality problems and 
start demonstrating consistent quality in their products.  OSC's 
order book for launches and satellite ventures is deep enough for 
them to tolerate some failures and defection of customers, but they 
will have to focus on quality and consistency to overcome some 
recent events -- particularly if they wish to pursue their ambitious 
growth plans.] 

2- WESTAR LOOKING FOR NEW 'COMET' CUSTOMERS 
   The first flight of the Commercial Experiment Transporter (COMET) 
is now set for 31 March.  While some minor problems have surfaced in 
the launch processing, the COMET team is on-track towards the 
scheduled launch date.  EER Systems is well along in launch pad 
construction at Wallops Island, Va., and fabrication of the portable 
gantry for COMET is underway.  Thiokol has poured three of the seven 
Castor 4B solid rocket motors needed for EER's Conestoga booster, 
and delivery of the motors to Wallops is on schedule in January to 
build up the booster.  The 10 experiments for the first flight are 
also nearly completed. 
   If all goes as planned, the first launch will go eastward from 
Wallops into a 40.5-degree, circular 300 nautical mile orbit.  After 
30 days, the Commercial Payload Operations Control Center at SII 
near Houston, Texas will command the separation of the recovery 
module from the orbital service module, and it will reenter and land 
at the Utah Test and Training Range.   
   Westinghouse, which built the service module and provided systems 
engineering for the $85 M COMET project, is now marketing a 
commercial version of COMET called "Westar", and pushing to line up 
customers for a first commercial flight in 1994.  Westar's marketing 
effort focuses on U.S. government agencies since they estimate the 
US DoD is the best source of near-term user demand.  But as of the 
first of the year, no customers have signed up, nor has Westinghouse 
sold the 100 pounds of additional payload capability it reserved on 
the first COMET return capsule. 
   According to Westinghouse, potential customers for Westar include 
the SDIO, the USAF Space Test Program, the Naval Research Lab, and 
the Army Space and Strategic Defense Command.  Apparently, due to 
short time until the first commercial Westar launch planned in 1994,  
Westar is focusing on organizations with payloads already funded and 
those with payloads ready to fly within the next 18 months.  Besides 
the DoD this includes other US government agencies and some 
international companies and agencies.  But Westar has found slim 
pickings for customers in the marketplace, and has run into 
competition from Russian recovery vehicles, and with other regional 
systems being development (See related article on EXPRESS).  
   The price of a Westar launch is being quoted at about $35 M, to 
reserve all 450 pounds available  in the recovery module.  The price 
includes some help with experiment design and integration into the 
vehicle, as well as launch and control of the orbital system.  For 
smaller users, a 10 pound payload can be flown on Westar for about 
$1 million, and 50 pounds for less than $5 million.             
   [Commentary: COMET/Westar is still on track to prove out their 
system in the next few months.  COMET is a reasonable example of how 
NASA and industry working together can set up the basics of a 
commercial venture, and get it out to the marketplace.  NASA, 
through the Centers for the Commercial Development of Space (CCDS), 
has provided a start-up market for this venture by committing to buy 
the first several COMET launches.  This allowed EER, SII, and 
Westinghouse to put together the venture. 
   But NASA has not committed to guaranteeing this market in the 
future, which I believe is also appropriate.  Westar/COMET must go 
out and find other customers to fill their order books in order to 
make this venture a success.  They need to find non-NASA customers 
to recover all of their development costs, which were only partially 
covered by the CCDS orders for a few initial launches, and to return 
profits to their investors.  
   There are several competitors for Westar's services in the global 
market; Russian return systems (which have been heavily marketed in 
Europe), Chinese return systems (including a new, larger version 
which was tested in August), and the German/Japanese EXPRESS system 
now in development.  Several other systems, such as the Italian 
CARINA system, have been proposed, but are not in active 
development. And the Shuttle is a competitors too, since most of 
Westar's potential customers are from the US government. 
   It should be noted Westar costs a customer over $78,000 /lb to 
launch and return a payload.  As a point of comparison, a shuttle 
returning 30,000 pounds of payload costs something less than 
$17,000/lb (assuming $500 M/flight), and SpaceHab is selling 
accommodations on the Shuttle for small "locker-type" experiments 
(typically <100 pounds, each) as a commercial venture.  My records 
show an average of 2 SpaceHab launches per year are being planned 
(first launch Apr 93). 
   The primary difference between Westar and SpaceHab is Westar can 
offer 30 days on orbit, whereas SpaceHab is currently only planned 
for about a week on orbit.  In response, SpaceHab offers in-flight 
access to the experiment.  Westar claims a much shorter time to 
launch for an experimenter but SpaceHab counter-claims their larger 
total payload volume allows individual users to find room in the 
SpaceHab module on very short notice for any scheduled SpaceHab 
flight. 
   This has focused some attention to some unresolved regulatory 
issues, including application of the Presidential Space Policy of 
1988, which removed commercial payloads from the shuttle.  There 
have been rumors Westar is pursuing a campaign claiming if the COMET 
system is shown to work, small Shuttle payloads then HAVE to be 
moved to Westar.  However, government researchers are objecting to 
imposition of this policy, since they don't want transportation 
costs increased by a factor of 4-5X to use Westar.  And based upon 
the current payload market for return payloads, most of the market 
is government funded or government originated. 
   I can understand why Westar would pursue such a policy, but I am 
of mixed emotions about its effect.  While supporting commercial 
ventures is, in general, a good thing to do --forcing the government 
to support a commercial service whose costs are much higher than 
other alternatives doesn't appear to be beneficial.  If Westar was 
offering a reasonably competitive price, say in the $20,000/lb 
range, then this would not an issue.  A factor of 4X increase in 
costs raises some concerns. 
   This may become a moot point if Westar lines up sufficient number 
of customers to feel comfortable about their venture, but if they 
cannot get customers, I expect this issue to become much more 
contentious.] 

3- COMET COMPETITOR 'EXPRESS' GETS FUNDED 
   The governments of Germany and Japan have agreed to develop a 
recoverable space capsule system for microgravity and other 
experiments as a joint program.  A memorandum of agreement was 
signed in mid-December by each government committing it to provide  
about $60 M (or about 8 B Yen) to develop and launch the first 
EXPeriment REentry Space System (EXPRESS).  
   [Commentary:  Another competitor for the recoverable payload 
market has entered the arena.  While this system has not yet been 
proven out, it has been in the works for some time.  There were 
several other proposals made by European organizations (Italy's 
CARINA, a British proposal, and a French system), but I think this 
German/Japanese project will probably preempt them.  
   EXPRESS will use a Japanese/ISAS M-3S rocket to launch a small 
760 kg capsule which will remain on orbit for 5 days or more.  
Experiments planned for the first orbital mission include 
microgravity tests on advanced catalysts for oil refining and 
materials tests of new substances for reentry structures for future 
programs.  
   In this joint program, Japan through ISAS provides the launch 
vehicle and some of the experiments, while the German Space Agency, 
DARA, develops the capsule and space system, reportedly in 
cooperation with Russian organizations.  This is claimed to be first 
bilateral cooperative space endeavor between Japan and Germany.  The 
first EXPRESS flight is tentatively scheduled for Feb 1994 from 
Kagoshima Space Center.         
   Regardless of the success or failure of COMET/Westar in the US, 
EXPRESS will probably go into flight operations.  It is backed by 
ISAS and DARA which control some substantial funding for 
microgravity research, and which can pursue occasional orbital 
duration/reentry flights as a logical extension of their suborbital 
microgravity experimentation. 
   Of importance to the US commercial space business, the existence 
of EXPRESS can siphon off market demand which could have gone to 
COMET/Westar, forcing that venture to focus more on the US internal 
market.   
   The participation of Russian organizations in this venture is 
also of interest.  Several Russian groups have been aggressively 
marketing microgravity return systems in Europe for some months, yet 
by helping DARA develop EXPRESS, Russian participation may reduce 
the capture of European or Japanese market share by Russian 
recovery/ reentry systems.  Most probably this turn of events is 
driven by short term economic concerns (read: cash flow), and the 
circumstance there is excess capacity in the ex-Soviet Union with 
several firms with reentry technology scrambling for survival.   
   Still unanswered is any concern about technology transfer about 
reentry systems expertise from Russia to Germany.  I don't know if 
this is an international MTCR issue, but I am somewhat surprised it 
hasn't been raised from any corner.  It an indication of how far 
things have changed to think the Russian government would approve 
the sale of reentry technology to the Germans.] 

4-  NEW COMMERCIAL LAUNCH SITES -MOST STILL THINKING ABOUT IT 
   The jury is still out on a new commercial launch site, despite 
several organizations looking at getting into the commercial launch 
site business.  Besides the new pad going in at Wallops Island, 
Virginia for COMET launches, there are active efforts underway at 
several other locations to try to institute commercial launch 
operations.  This is a summary of the current status of some of them 
-- Virginia, California, Georgia, Hawaii, Florida, Alabama, Alaska, 
and New Mexico in the US; Canada; Cape York and Woomera in 
Australia. 
   Wallops Island, Virginia USA -- A new concrete pad for the 
Conestoga rocket to be used for COMET/Westar missions is almost 
complete.  First launch of the COMET system is planned for 31 March 
1992.  
   Vandenberg Air Force Base, California USA -- while some interest 
has been expressed in using VAFB to support commercial launches for 
LEO communications satellite constellations, there have been no 
commitments to use VAFB.  
   Kingsland Site, Georgia USA -- A preliminary study assessing the 
feasibility of using the disused Kingsland Missile Test Launching 
Site in Camden County, Georgia should be complete by mid January.  
This study is funded by the Georgia Tech Research Institute and the 
Camden-Kings Bay Chamber of Commerce, and focuses on the economic 
feasibility and environmental impacts of reopening the site, last 
used in the 1960's.  According to local press reports, preliminary 
results look favorable, with estimates of about $ 3-3.5 M to 
refurbish the site and an adjacent 4000 acres.  GTRI will next 
approach the Georgia state government for a grant for additional 
development studies and marketing efforts.  It is also rumored other 
sites along the Georgia coast are being examined by other 
organizations as candidate commercial launch sites. 
   Hawaii, USA -- The state-sponsored Hawaii Office of Space 
Industry was first set up in 1988 to sponsor a commercial launch 
site on the island of Hawaii.  However, the required Environmental 
Impact Assessment report for the project is still not complete, over 
2 years behind schedule.  The very slow response by the state to an 
idea originally proposed in 1986 has now become a local political 
issue, and has generated vocal pro- and anti-space launch site 
factions in local communities.  OSI has primarily used its funding 
from Hawaii's state legislature to support space education and 
awareness projects, including the 2nd Pacific ISY Conference held in 
November 1991, the `Future Flight Hawaii' space camp for elementary 
level students, and a series of public `Space Pavilions'.  The 
latest version of Spaceport Hawaii seems to be the "Pacific Aloha 
Spaceport", proposed for offshore of the Island of Hawaii, and 
dedicated to purely peaceful pursuits. 
   Cape Canaveral & Cape San Blas, Florida USA --The state-sponsored 
Spaceport Florida Authority is pursuing several activities to 
promote commercial launches from Florida.  These include 
demonstration of an Advanced Launch Control system to serve as a hub 
of a new commercial space launch facility at Cape Canaveral,  the 
opening of a commercial sounding rocket launch site at Cape San Blas 
on the Florida panhandle, several sounding rocket launches, and 
underwriting of the funding of other commercial space infrastructure 
elements in the Cape Canaveral area. 
   Mobile Bay Platform, Alabama USA --Under a low level effort at 
the University of Alabama at Huntsville, the possibility of using a 
modified offshore oil platform or barge in Mobile Bay for smallsat 
launches is being examined.  Chuck Lunquiest, associate VP for 
research at UAH, recently briefed Alabama's state Aerospace Science 
and Industry Commission, recommending Alabama approve $2 M in state 
funds for a demonstration launch.  This launch, it was suggested,  
could use boosters from UAH (where a NASA CCDS is located, which is 
funding suborbital microgravity flights), or from NASA's Marshall 
Spaceflight Center (also in Huntsville).  Any state funds are 
expected to be matched by federal funds.  Former Marshall director 
J.R. Thompson, who chairs the state aerospace panel, said he hoped 
feasibility studies can be completed in six months, but also warned 
there should be a clear idea of the size of the market before any 
project go-ahead. 
   Poker Flats, Alaska USA -- Suborbital missions from the Poker 
Flats launch site in Alaska, operated by the University of Alaska, 
are continuing.  Initial planning to develop a commercial orbital 
launch site in conjunction with International Microspace Inc.(IMI), 
have been held up, as IMI's worsening financial status has virtually 
shut down the company. IMI's financial status has been deteriorating 
after an expected investment of several millions of dollars from the 
State of Alaska's development fund was not approved. (See related 
article.)  Little interest has been expressed from other 
organizations to launch satellites into polar orbit from Poker 
Flats. 
   White Sands, New Mexico USA -- A `Southwest Regional Spaceport 
Program' has been proposed by the state of New Mexico, and was 
briefed at the December meeting of the Aerospace States Association.  
This proposal seems to be built around the successful development of 
a Single State to Orbit (SSTO) vehicle which could operate from 
inland sites.  Current Spaceport efforts are looking into the 
technical feasibility and business viability of establishing a 
spaceport in southern New Mexico near White Sands Missile Range for 
launching and recovering government, commercial, and international 
reusable space capsules and vehicles. This program would be 
administered by a proposed New Mexico Spaceport Authority.     
   Churchill Research Range, Manitoba Canada -- Canada Space 
Technologies Inc. is proposing a C$80 million plan to refurbish the 
Churchill Research Range in Manitoba, previously used for sounding 
rocket launches.  Their estimates are they will be a potential 
market of commercial smallsat launches worth C$200 million annually 
by 1999, and to exploit this, CSTI is looking for a company as a 
partner which has a "long-term interest in space that needs 
strategic access to launch services: a partner that could steer 
business our way." 
   Cape York, Australia -- As of the end of December, funding for 
the Cape York project was to cease if the latest organization trying 
to develop a commercial launch site on the Cape York peninsula could 
not show verifiable financial backing for the project.  Current data 
indicates Cape York International Space Launch Ltd. did not raise 
the money needed, and Australian government financing has ended for 
this project.  This is not necessarily the end of the Cape York 
project as it could be continued under private funding, but is 
definitely a strong negative. 
   Woomera, Australia -- The Australian Space office has funded an 
A$1.25 M feasibility study into re-opening the Woomera launch range 
in Southern Australia through a consortium of British Aerospace 
Australia, Auspace and Hawker de Havilland.  Key issues being 
studied include the ability to refurbish Woomera into an operational 
site, the potential for finding potential investors for such a 
project as a commercial venture, and assessing if sufficient users 
could be captured to make such a project a financial success.  As 
part of this effort the "Southern Launch Vehicle", a smallsat 
launcher, is being examined to put small (<2200 pounds) payloads 
into LEO.  [It should be noted this effort is independent effort 
from the Ausroc group which attempted a suborbital launch from 
Woomera last month.] 
   [Commentary:  Just a roundup of the current status of several 
proposed commercial launch sites.  After writing this, I noted I did 
not include the new commercial facility for Proton just approved for 
Pletsesk in Russia (see the related article).  Of the sites listed 
above, the most active financially and politically is Spaceport 
Florida, having spent several millions in supporting commercial 
launch infrastructure at Cape Canaveral, and demonstrating a very 
active political presence both within and outside of Florida. 
They've had the advantage of being located where most of the US 
commercial launches take place, and of having good support from the 
Florida state government. 
   Of the remaining sites, California and Virginia are probably the 
next most well developed.  Both are existing launch sites, with 
existing infrastructures and operations, and with some local and 
regional political support.  There have been some frictions between 
EER and NASA during construction of the Conestoga launch pad and 
other launch support facilities at Wallops, but they seem to have 
been smoothed over.  The only vehicle planned for Wallops is COMET, 
but other vehicles have been proposed for that site as well. 
   On the other coast of the US, California is making a strong pitch 
for commercial launches from VAFB.  California's state and local 
governments appear to be making an honest effort to streamline the 
process to get commercial users into VAFB, but until there is a 
larger need for commercial polar launches and some of the regulatory 
and market questions are resolved for LEO communications satellite 
constellations, they probably won't see much commercial action at 
VAFB. 
   A year ago, I would have put Alaska and Hawaii higher in the 
probability and active list.  But Alaska's commercial launch site 
was very closely identified with IMI and use of IMI's OrbEx launch 
vehicle, but as IMI is now in severe financial problems, a 
commercial launch site at Poker Flats is now rather questionable.  
Hawaii, after a very strong start in the late 80's, has not seem 
much recent activities related to a commercial launch.  During the 
interim, several vocal and active anti-launch political 
organizations have sprung, and while they are primarily directed 
against US military suborbital flights from Hawaii, they have also 
directed their ire against the proposed commercial launch site.  
This will make a future commercial launch site more difficult, if 
not impossible. 
   Georgia and Alabama are also looking to get into the market. 
Unfortunately, the competition is tough and established in the 
market.  While their sites might be useful, they will have to offer 
an amazing deal to get enough commercial companies to be a real 
success.  I would not be surprised if Alabama's entry does not try 
to overtly link itself to on-going microgravity suborbital missions 
out of the UAH CCDS in Huntsville, or to test flights for Marshall 
Spaceflight Center or Redstone Arsenal (home of the US Army 
Strategic Defense Command).  
   As a final note on US commercial launch site activities -- a lot 
of the activity in the US to establish 'commercial' launch sites 
seems to be fed by the availability of "Space Grant" money from the 
US government, which is made available for launch site 
"infrastructure development", if matched by state or industry funds.   
How many of these sites would be in consideration if such funds were 
not available is an interesting topic for discussion.  And how many 
sites the expected market might sustain is another.... 
   Canada's entry for a commercial launch site seems to be a "me 
too" proposal -- and I think might be linked to the Bristol 
Aerospace proposal to develop a small Canadian orbital launch 
vehicle or a hope to get one of the LEO constellation firms 
interested in a "local" high-latitude site.  CSTI has identified 
they will need a strong commitment from a major commercial player 
before reactivating the Churchill range.  
   Cape York seems to be dying.  Several consortiums have tried to 
organize the funding and regulatory go-aheads to start up the 
commercial launch site in northern Australia, but none have been 
able to locate real financing or chart a path through the regulatory 
hurdles.  The "Southern Launch Vehicle" consortium seems more real, 
and while they are looking to buy most of their launcher technology 
from other nations and launch from an existing site, they still have 
to show a competitive advantage from other launch sites.  If 
evaluated on a purely financial and market basis, they may also find 
themselves without a sustainable competitive advantage without a key 
strategic partner guaranteeing a reasonable market. 
   The wild card in this deck is New Mexico, home of the very active 
White Sands Missile Range.  A commercial launch site at WSMR might 
make sense to support some of the on-going suborbital test launches 
for NASA and the DoD, and might be capable of expanding into an 
orbital spaceport if fully reusable rocket technology is proven out.  
There are significant unanswered questions here, but this option is 
an interesting one.] 

5-  NASA ANNOUNCES BLOCK BUY OF LAUNCHERS FOR EOS 
   In one of the most important contracts for the commercial launch 
industry this year, NASA is planning to release a single request for 
proposals (RFP) for a large block of launch services.  The RFP is 
expected to request bids for over 20 intermediate size launches, 
each capable of putting 13000 pounds into 705 Km high polar orbits.  
This projected launch demand is predominately driven by launch of 
   NASA's Earth Observation System (EOS) spacecraft for the AM, PM 
and CHEM series.  At three flights each, the EOS series can be for 
up to nine launches, plus additional launches for the Tracking and 
Data Relay Satellite (TDRSS) system and follow-on Geostationary 
Operational Environmental Satellites (GOES) satellites are expected 
to also be included in the RFP.  
   [Commentary:  This contract is one of the three most important 
launch services contracts to be decided this year.  Combined with 
the other two major contracts -- the USAF MLV-3, and the Iridium 
initial constellation launch contracts -- a very large chunk of 
commercial launch demand for the next decade will be determined this 
year.  Winning one of these contracts will provide a solid business 
base for the next decade for a launch services firm.  If an existing 
firm does not win at least one of these contracts, its  ability to 
compete may decline,  as winning firms can use these large multiyear 
contracts to maintain a higher-rate, more efficient production line.  
   Primary candidates to bid on this contract are expected to be 
Martin Marietta (proposing a Titan III) and General Dynamics (an 
Atlas II series booster) since their off-the shelf systems come 
close to provide this expected launch capabilities.  McDonnell 
Douglas is rumored to be examining a highly upgraded Delta rocket 
(the "Delta III") to meet this contract's  requirements, and those 
of the USAF MLV-3 contract, but little information has been released 
about this option. 
   In the future, there is also a possibility of a second EOS launch 
system contract.  The AERO and ALT series of EOS spacecraft are 
currently envisioned as much smaller satellites, in the range that 
Delta or Pegasus could launch them.  There are 5 AERO satellites 
planned (approximately Pegasus class) and 3 ALT satellites 
(approximately Delta class).] 

6-  IRIDIUM NEGOTIATING WITH INVESTORS AND FOR PROTONS 
   Over the past month, there have been two significant news 
releases relating to the Iridium communications constellation.  
Iridium Inc., a subsidiary of Motorola Inc., has been proceeding 
with plans to place a constellation of 66 satellites in low Earth 
orbit (LEO) to provide world-wide, seamless voice and data 
communications.  They are the largest and most sophisticated of the 
LEO communications satellite constellations currently being 
proposed. 
   To fund the Iridium venture, Iridium Inc. has been seeking 
investors to fund a world-wide investment pool to provide funding 
for the project, as well as to offer entry into differing global 
regional markets.  About $3.4 B is required to take the Iridium 
concept into operations, and Iridium's parent, Motorola, has already 
sunk about $100 M into the project.  Recent press report state 
Iridium has been successful in lining up several major investors, 
including the government of Brazil and United Communications Co. of 
Thailand, each for $80 M for 5% ownership in the project, in  
addition to Hutchison Telecom Ltd. of Hong Kong (which had 
previously announced joining).  Iridium reports they expect to 
complete negotiations with investors during the first quarter of 
1993 to fund the full $3.4 B needed 
   Also, Iridium is in negotiation with Krunichev Enterprises for 3 
launches of Iridium satellites on the Proton launch vehicle from the 
Pletsesk launch site in Russia.  Krunichev Enterprises represents 
the factory near Moscow which produces the Proton launch vehicle, 
and has been offering Proton launch services on a commercial basis.  
An Iridium spokesperson confirms the report they are in negotiation, 
but would not release details of the on-going negotiations.  It is 
rumored Krunichev will trade launches for an equity share in 
Iridium.  The  Iridium spokesperson stated Iridium plans to rely 
primarily on US launch providers to launch the planned 66-satellite 
constellation. 
   [Commentary: Two interesting news items on Iridium.  The first is 
important in that the financial status of Iridium has been a topic 
of hot debate.  The $3.4 B investment needed to institute the full 
Iridium constellation is the largest amount of any competing LEO 
communications system.  While Iridium could probably provide more 
and more highly sophisticated services than its LEO competitors, it 
also requires the largest investment.  Iridium had set a preliminary 
target to have the investment consortium set up by the end of 
December.  As that milestone rolled by and no news appeared about 
new Iridium investors, rumors have appeared that Iridium is in deep 
financial trouble, and could not find the necessary investors. 
   News releases and rumors are now more favorable.  While I believe 
the jury is still out that can get sufficient investors signed on (I 
want to know who, how much, and hear it from the other investors as 
well as from Iridium), the current news indicates the deal is still 
in play, and progress is being made.  It is important to note 
Iridium has apparently made inroads into lining up international 
partners.  
   The importance of key international partners cannot be 
overemphasized, since they can provide entry into international 
regional markets (obviously needed for a 'global' system), and to 
work the regulatory issues within each region if Iridium is to have 
access to the frequency allocations within those countries, or to 
tie into other national telecommunications systems.  There are been 
no rumors, yet, of partners in the key markets for Europe and East 
Asia, but strategic partners here are essential.  We'll just have to 
wait to see what happens.... 
   The news on negotiations with Krunichev was, interestingly 
enough, broken by the Interfax News Agency in Moscow.  That these 
negotiations were underway was revealed when Russia's new Prime 
Minister Viktor Chernomyrdin released permission to sign the 
contract and gave permission to invest US$40 M of Russian government 
funds to prepare Pletsesk.  The Russian government funding is tied 
to recoupment from Krunichev in hard currency from future contract 
revenues and is earmarked for upgrading the Pletsesk launch site to 
support commercial launches.  Chernomyrdin requested a plan be 
proposed before 1 Feb from the Russian defense ministry for this 
commercial launch facility.  
   There is some discrepancies in the reported information -- most 
report that a Proton launch vehicle will be used for the 3 Iridium 
launches, and at least one report has Pletsesk being upgraded for 
commercial launches of converted SS-19 ICBMs.  From other 
developments (such as the Krunichev/Lockheed teams reported below), 
the Iridium launches on Proton make sense.  However, conversion of 
Pletsesk to launch Protons is more questionable, since the demand 
for Proton launches into high inclination is very low.  So we can 
only conclude some launches on a Proton are in negotiation, and the 
commercial use of Pletsesk by some vehicle is being considered.   
Conversion of Pletsesk for SS-19 launches has other international 
ramifications, which I will try to cover in a later article. 
   The investment for a new commercial launch site is important news 
in Russia as it provides needed jobs for Russian workers idled by 
the collapse of Russian military spending and the Russian defense 
industry.  Some reports claim jobless ex-Defense workers could 
number up to 1.5 million by this spring in Russia.  Obviously, while 
$40 M is small in response to the problem, it is a sign of direct 
government support for commercial space activities in Russia and of 
great import to the Russian ex-defense space industry.   
   However, export of US-built satellites to Russia is still 
prohibited under US technology transfer regulations.  Some case-by-
case exceptions have been made, but removing the restrictions is not 
planned by the US government until "rules of the road" trade 
negotiations are complete with the Russian government for commercial 
space activities.  These negotiations are currently underway, now 
involving the US, Russia, and the European Economic Community. 
   There is also a heated on-going discussion within the US trade 
community regarding space deals with Krunichev.  I'll cover this in 
the related article on the Lockheed/ Krunichev deal.] 

7-  LOCKHEED TEAMING WITH KRUNICHEV ANNOUNCED 
   It was announced at the end of December that Lockheed Corporation 
and Krunichev Enterprises had teamed to market the Russian-built 
Proton launch vehicle.  To be exact, Lockheed Commercial Space 
Company, a new wholly owned subsidiary of Lockheed Missiles & Space 
Company, Inc., and Krunichev Enterprises have agreed to establish 
Lockheed-Krunichev International (LKI) to act as a selling agent for 
future Proton launches.                
   The joint business venture has been approved by Russian Prime 
Minister Viktor Chernomyrdin, and the U.S. Department of State has 
provided an initial authorization for the space venture.  At the 
press conference announcing the teaming, both Lockheed and Krunichev 
stated they are committed to comply with all relevant regulations 
and laws in both countries, including the Missile Technology Control 
Regime. 
   [Commentary:  This project has sparked a lot of interest and 
discussion in the commercial space community.  From the outside, 
this deal looks pretty good.  The Proton is a reasonably priced 
launch vehicle with a good track record and is being considered for 
a variety of commercial and international launches.  Lockheed 
appears confident that Krunichev's production line can keep 
supplying them as needed.  Lockheed's evaluation, according to Mel 
Brashear, VP and head of LMSC's Space Div. is 40% of the Proton is 
manufactured from scratch at the Krunichev plant and another 40% 
(the launcher's six RD-253 storable liquid engines) are built at a 
nearby NPO Energia factory. Another 10% are parts that are easily 
replaced from other sources, and only about 10% are key parts 
produced only by Russian subcontractors. 
   This venture fits strategically with Lockheed's future business 
plans as they are just entering the commercial satellite 
manufacturing business.  By teaming with Krunichev, Lockheed can now 
offer a low-priced "one stop shop" satellite and launch deals to 
potential customers.  And of obvious interest, Lockheed is teamed 
with Motorola to build the satellites for the Iridium constellation,  
for which Krunichev is negotiating for the launch 3 Protons 
potentially carrying a total of 21 Iridium smallsats.  
   The exact financial nature of the new relationship was not yet 
released, but significant funds have been rumored to be involved. 
   However, the remaining hurdles for this venture may be sticky, as 
they involve political wrangling regarding international trade 
regulation. 
   The first issue to be overcome is the current US government 
prohibition on the export of US satellite technology (such as 
Lockheed's satellites) to Russia until current "rules of the road" 
trade negotiations are completed.  Complicating matters, Krunichev 
is under investigation for violation of the Missile Technology 
Control Regime (MTCR) regulations restricting the transfer of 
technology which could promote the development of long range 
missiles capable of carrying weapons of mass destruction.  In a 
previous and rather contentious action, export sanctions were 
imposed upon Glavkosmos in Russia and the Indian Space Research 
Organization as they were found by the US State Department to be in 
violation of the MTCR in transferring cryogenic engines and 
technology from Russia to India.  Krunichev is under investigation 
for having a key role in this transaction, and could have export 
sanctions placed upon it. 
   Adding to this complication, this deal has become embroiled in a 
rather nasty political fight in Washington DC over roles and control 
of export licenses.  First, there is the unresolved investigation 
into whether or not sanctions should be imposed upon Krunichev.  
This has led some parties in the US government to wonder if any 
proposed commercial dealings with Krunichev should be approved until 
the investigation is complete (expected first part of this year). 
   Secondly, during trade negotiations in Moscow during mid-
December, Yuri Koptev, the head of the Russian Space Agency 
reportedly told a US negotiating team he would consider encouraging 
Russian enterprises to sell rocket technology to other countries 
"like Iraq" if they could not compete in the Western commercial 
launch market.  The quick action by the State Department to approve 
the Lockheed/Krunichev deal is seen by some as a quid pro quo to 
discourage Russian rocket technology sales to other countries. 
   Lastly, the State Department made a quick approval of the 
Lockheed/Krunichev deal without completing consultations with other 
involved organizations within the US government.  Legally, the State 
Department has the sole right to grant export approval, but other 
organizations such as the Defense Department, normally have an 
important role in evaluating export approvals involving sensitive 
technologies.  If there are disagreements between the US Government 
organizations involved, decisions are normally resolved through 
interagency coordination, and if that can't resolve the issue, then  
bumped up to the president and the US national security advisor for 
a decision. 
   In the Krunichev/Lockheed case, a meeting was held just before 
Christmas where representatives from several agencies expressed 
strong opposition to granting the request from Lockheed to team with 
Krunichev to sell Protons.  According to published reports, concerns 
were expressed at the meeting about missile technology 
proliferation, potential impacts upon the US commercial launch 
industry, and upon the on-going trade negotiations.  Two days later 
Frank Wisner, State Department undersecretary for international 
security affairs, approved the Lockheed request to work with 
Krunichev.  Apparently this was done without consulting with other 
government organizations, some of whom were still continuing a 
dialogue with the State Department about this action.  
   Needless to say, the short circuiting of the normal approval 
process despite strong opposition to the approval has caused a stir 
within the Washington trade community.  This led to a meeting of the 
US National Security Council in early January, at which t 
disagreements with this action (and several other export approvals) 
were aired in the White House.  Again, serious opposition to 
approving this license were aired by the participating 
organizations.  But, once granted by the State Department a license 
can be suspended or withdrawn only by the President, the Secretary 
of State, or the Deputy Secretary of State.  To resolve this issue, 
the case looks like it will be escalated to the President, since the 
organizations appear deadlocked. 
   My expectation is the outgoing Bush administration will not take 
action of this during its last week or so in office.  However, as 
new appointees are put into place in the new administration, this 
action will be one of the first on the international space trade 
agenda.  I would not be surprized if this license is not suspended 
pending further review by the new administration.  This may be 
complicated by events, as most of the coordination has taken place 
within and around the National Space Council, which is rumored to be 
targeted for dissolution under the Clinton/Gore administration.  The 
trade policy decision can go forward under the sponsorship of the 
National Security Council, but until a new space policy coordinating 
group is put into place (such as the rumored Technology and 
Competitiveness Council) interagency discussions may be somewhat 
hindered. 
   Bottom line on this, is  the Lockheed/Krunichev deal is still of 
some question -- but should be soon resolved.] 

8-  IMI TEETERS ON BRINK 
   International Microspace Inc. (IMI) is reportedly in serious 
financial difficulties.  IMI is a small startup company from 
Herndon, VA which has been pursuing the smallsat launcher market.  
They recently won a coveted contract from the US Strategic Defense 
Initiative Organization (SDIO) to launch a small test satellite for 
$12.6 M, and had options for several more launches to follow. 
   However, financial problems may sink IMI before they can get to 
the launch site.  IMI reportedly has raised about $ 2.5 M in startup 
funds, most of which have apparently gone into developing their 
concept and marketing it. At the end of October, IMI was turned down 
for a major equity investment by the State of Alaska.  It was hoped 
that by teaming with IMI, the State of Alaska would encourage 
further use of the Poker Flats launch site, and would encourage more 
high-technology and space-related businesses to operate through 
Alaska.  But this deal fell through. 
   Now IMI has to obtain credible financing in order to develop a 
product sufficient to pass the SDIO first design review (which was 
officially planned to occur by the end of December) to stay on 
contract for their one real customer.  The planned review includes a 
program financial review where SDIO has to be convinced IMI has the 
wherewithal to stay in business long enough to complete the 
contract. 
   [Commentary:  There are several rumors floating around about what 
might happen next to IMI.  In my estimation, IMI needs at least $10M 
to complete their system for the first launch.  Expertise can be 
hired and the parts bought, made and assembled into a small, all 
solid launch vehicle like OrbEx, but without ready money, nothing 
will happen. 
   Reportedly CTA of Rockville, Maryland is considering buying out 
IMI.   Rumors state a majority share of IMI is available for as 
little as a few hundred thousand dollars, but any buyer would have 
to possess or be able to raise the required funds to complete the 
SDIO contract.  CTA is a medium sized company with combined sales of 
about $144 M last year, so they probably could fund the IMI contract 
to completion.  Borrowing, say $10 M, at current corporate interest 
rates would mean CTA, or any other purchaser of IMI, would have to 
earn back $1-2 M in profit each year just to cover the loan.  Given 
typical government contract profit margins are in the 5-10% range, 
an investor would have to line up at least 2 launches of the Orbex 
system each year, for probably 10-20 total launches.  
   CTA may have an advantage in this area since they recently 
acquired DSI, another small firm with an established track record in 
producing small satellites for the government.  Buying IMI would 
allow CTA to offer a complete, "end-to-end" launch services deal to 
smallsat customers, and allow them to compete with OSC on that basis 
for payloads.  And IMI holds a stake in the proposed Constellation 
Communications LEO satellite constellation along with DSI, so there 
might be some synergy there as well.  
   Other companies, such as OSC, have reportedly made inquiries into 
taking over the IMI contract with SDIO, but the continued existence 
of IMI and any future launches are still unknowns at this time.] 

9-  RUSSIANS OFFER EX-ICBM TO SOUTH AFRICA AS LAUNCHER 
   At the turn of the year it was reported a Russian organization 
has offered to put South African satellites into orbit using 
surplused ICBMs.  Apparently, the Scientific and Technological 
Center in Moscow has had some preliminary talks with a South African 
organization to use a surplused SS-20 ICBM to launch some proposed 
South African smallsats.  As reported, the SS-20 was proposed to be 
used from an existing launch site near Murmansk, or to be shipped to 
South Africa on a mobile launcher.  The price was reported to about 
$5-8 M per launch. 
   [Commentary: This most assuredly would come under the aegis of 
the Missile Technology Control Regime, as this could involve the 
direct transfer of state-of-the art ICBM technology to South Africa.  
There is some doubt as to the veracity of this published report, but 
I am aware of some on-going negotiations between differing countries 
and organizations about South African satellites, the launch of 
South African satellites, and the development of a South African 
launch vehicle.  I included this article to illustrate an issue 
which would trigger the MTCR concerns -- particularly since South 
Africa was recently reported in the nuclear industry trade press to 
have substantially larger stockpiles of fissionable material than 
previously thought.  Selling a mobile ICBM to South Africa would 
definitely cause eyebrows to be raised, at the minimum. 
   There are other launch system alternatives available, though, 
which should meet both parties needs.  For example, launching the 
satellite from Russia should meet most of the MTCR concerns, and 
make such a business arrangement more palatable. 
   Proposing the use of surplused ex-Soviet ICBMs is also of 
interest.  There have been several Russian or Ukrainian proposals 
made for use of surplused ICBMs, and even a flight test of a 
converted ICBM, but the use of converted ICBMs may complicate the 
recently signed START treaty.  As missiles are removed from 
operational status, their destruction must take place on a firm 
timetable and in a verifiable manner.  Under the SALT II treaty, 
which was enacted previously, there were limitations on how many 
vehicles could be "flown to destruction" over a limited period of 
time to limit the amount of additional operational expertise and 
data each side could gather. 
   I haven't yet seen the exact wording of the START treaty for this 
area, but over a thousand ICBMs could be made available on the 
market.  If such systems are sold at "scrap" costs, and used to 
launch payloads, current commercial launch firms such as OSC or 
General Dynamics or Arianespace could see a major impact as 
customers switch to cheap, converted ICBMs.  This is a concern 
within the commercial launch industry.  
   A recent economic analysis of this by the US Dept. of 
Transportation's Office of Commercial Space Transportation was 
presented at the World Space Congress during last September, which 
showed the economic disadvantages of reusing ballistic missiles as 
launch vehicles outweighed the gains.  In a paper given by Richard 
Scott associate director of OCST, he indicated such a policy, even 
if used only for government payloads, would hurt commercial launch 
providers and launch motor manufacturers. 
   Using companies in the small payload launch market sector, which 
tend to be small, relatively new, and weakly diversified, the 
analysis indicated their ability to survive in a competitive market 
highly depends upon their ability to adapt and provide services 
related to use of missile-type motors.  But, to compete with 
recycled ICBM system, they would be at a disadvantage with the firms 
who originally built the ICBMs.  While reuse of the missile would 
reduce launch costs for a temporary period, only commercial 
customers were estimated as likely to benefit in ways that could 
come back to generate new revenues.  Federal budget constraints 
probably would prevent government users  from increasing their 
demand for space launch services, according to Scott's paper.  Price 
increases would probably be seen in the market, as the market for 
"commercial" launch motors would decrease as the demand slackened, 
which in turn would promote further decreases in demand from the 
higher prices.  
   Fundamentally, the economic analysis showed in the short run, 
firms who converted ICBMs and surplused motors would make increased 
revenues, but in the long term, this would not lead to increased 
usage of space systems, and would increase commercial launch prices. 
   In the US, the policies on how to use or dispose of surplused 
ICBMs have not yet been decided.  In the ex-Soviet Union, there are 
economic pressures promoting the sale of these surplus assets to 
provide cash-flow to idled defense industries.  I expect to continue 
seeing offers from the ex-Soviet Union to provide these launch 
vehicles for commercial launches.] 

FINAL NOTES - 
   This column was about half written as I sent the last one out, so 
this may be an all-time record for two columns closely spaced.  I've 
also managed to churn through the last of the piles of data I've 
collected for this column in the last year, allowing me start the 
new year without a huge backlog of news, which makes the task of 
generating these columns a bit less duanting. 
   I'm hoping to put together a "commercial space index" for the 
next issue built around commonly available stocks, and to have 
completed a bit of research on the firms involved.  
   And as always, I hope you folks find this stuff useful and 
interesting -- Any and all comments are welcome. 

-----------------------------------------------------------------
Wales Larrison                          Space Technology Investor  
"Suppressio veri suggessio falsi"            P.O. Box 2452 
                                        Seal Beach, CA 90740-1452