Space - It’s Not Free Anymore
As the COVID-19 outbreak threatens and cripples the world economy, especially hampering the growth of developing nations in the Middle East, why are Iran and other Middle Eastern nations pursuing advancements in space technology while facing immense opportunity costs? Furthermore, who is monopolizing this market?
With Iran launching its mixed-use satellite successfully into the Low Earth Orbit (LEO) on 28th April 2020, it faces more obstacles than just the prospect of US sanctions under their “maximum pressure strategy” (Bizaer, 2020). As the COVID-19 outbreak threatens and cripples the world economy, especially hampering the growth of developing nations in the Middle East, why are Iran and other Middle Eastern nations pursuing advancements in space technology while facing immense opportunity costs? Furthermore, who is monopolizing this market? To answer these questions we have to understand the economic limitations and benefits of launching satellites into the LEO.
The benefits of launching satellites into the Low Earth Orbit outweigh the costs incurred in building satellites for the countries sending these satellites. Thesocio-economic benefits they provide are numerous and irrefutable. Multiple nations have established Global Positioning Systems and Geographic Information Systems using LEO; both of which are crucial in the national defense of a country, as well as in aiding other technology. Furthermore, better weather predictions using satellites in LEO can reduce the uncertainties faced by the agricultural sector of a region. Governments can better monitor various resources and predict natural calamities such as flooding, earthquakes, and hurricanes. This has enabled countries to make appropriate and timely preparations not only saving millions of lives over the past few decades but also reducing redevelopment and restructuring costs (Hertzfeld & Williamson, 2007). Satellites have also significantly improved telecommunications, especially for ‘space-advanced’ nations. For example, with the aid of satellites, India overcame the life-threatening Polio disease by tracking and monitoring containment zones, in turn improving the productivity of its workforce and generating higher revenues due to better health care. This presents one of the many examples that scratch the surface of socio-economic benefits satellites provides (Bell, 2016).
Meanwhile, other countries take advantage of the Low Earth Orbit – pushing other nations out as well as causing many negative externalities.
In our understanding, space can be classified as a ‘public good’ for nations around the world. Public goods are generally classified as non-rivalrous and non-excludable. The vastness of space makes it both non-rivalrous (one unit of space being used doesn’t limit another unit of space from being used) and non-excludable (preventing access to space is unfeasible, anyone with relevant technology can access space). With this in mind, access to LEO is non-excludable as the good already exists and it is not feasible to prevent someone from enjoying its benefits as no one person or country has exclusive rights to it. However, once a country's satellite has occupied a certain position in LEO, no other country can place its satellite in the same position, making it rivalrous in nature. As such, even though space itself may be a public good, certain orbits in space such as LEO are a common pool resource (example: lakes) as they are non-excludable but rivalrous (Salter, 2016).
The tendency to overuse common pool resources leads to socially non-optimal outcomes. According to Willem Roper from the infographic website Statista, there are approximately 1,500 satellites in the LEO.The United States is leading the space race, with 1007 satellites in LEO while China and Russia are trailing at second and third place with approximately 300 and 160 satellites, respectively. Other countries have satellites in the LEO, such as India and Turkey, in far fewer numbers. This asymmetry in the number of space crafts dominated by a few countries, namely the US, China and Russia, is concerning for all other countries due to the rivalrous nature of LEO as a common pool resource. There are only a limited number of satellites that can be placed close around the Earth. On the other hand, since no one country has rights over LEO, its non-excludable nature lets technologically advanced nations use the first mover advantage and reap the benefits of the good.
This asymmetry in the number of space crafts dominated by a few countries, namely the US, China and Russia, is concerning for all other countries due to the rivalrous nature of LEO as a common pool resource.
Each nation, be it US, China or Russia, act in its own best interest with respect to space. However, each nation’s actions have larger consequences for all of society in the case of common pool resources such as LEO. According to NASA there are 6000 MT of space debris in the LEO, and 70 percent of this space debris is contributed by USA, China, and Russia. Hence, these dominant nations have created a negative externality for all countries (including themselves) when launching new satellites. The negative externality is better understood by the following diagram-
Countries put satellites in LEO based on their personal cost considerations, but they don’t take into account the negative external costs, in this case space debris. This results in a market failure, as social cost is higher than the personal cost of supply, highlighted as the red region. Their actions do not align with what is socially optimal. Without being able to prevent the overuse of the common resource by other nations, each nation has an incentive to overuse the resource themselves as the personal cost is lower than the social cost, society foots the bill on their behalf. This phenomenon of overuse of common pool resource more than socially optimal levels is an example of the tragedy of the commons.
With all this in mind, the barriers to entry for developing nations, such as countries in the Middle East, to launch satellites into LEO is on the rise. Limitations in resources such as capital investment and lack of technology are a major hindrance for developing nations such as Iran. This is giving ‘space-advanced’ nations, particularly USA, China, and Russia an oligopolistic control over the Low Earth Orbit (Jussawalla, 1984). As the amount of space debris in LEO increases, dealing withsatellites become harder, requiring increasingly innovative technology. In order to protect satellites from debris, better quality shielding is used, thereby increasing manufacturing costs. Simultaneously, as space debris continues to grow, the probability of collision also significantly rises. This is an upward spiral as nations will experience surges in insurance premiums on satellites, further increasing cost (Cohn, 2019). All of these barriers to the utilisation of LEO makes it not only rivalrous but also excludable to some extent, like a private good.
Connectivity and network capabilities are essential for nations today, and most of the technology infrastructure is crucially dependent on satellites. Developing nations who are late to the space party face increasing opportunity costs when launching LEO satellites, due to increasing negative externalities with time. As the barriers to entry keep growing, it will become exponentially hard for developing nations such as Iran, Turkey and Afghanistan to launch satellites. However, it is also becoming increasingly important for such nations to establish space platforms to pursue independent economic growth using modern technology. With a few dominant nations occupying the majority of LEO it is becoming more rivalrous in nature. Once there is no more capacity, LEO will no longer be accessible to the rest of society. This will result in a LEO that is not only rivalrous but also excludable, thereby slowly shifting the landscape from a common pool resource towards the privatization of space. Space will no longer be a resource for everyone unless corrective measures are implemented.
Citations and Sources for Further Reading:
Bekdil, Burak Ege. “Turkey Moves to Launch Space Agency.” Defense News, Defense News, 8 Aug. 2017, www.defensenews.com/space/2017/03/01/turkey-moves-to-launch-space-agency/.
Bell, Robert. “The Final Battle To End Polio: A Better Satellite World Perspective.” SatMagazine, 2016, www.satmagazine.com/story.php?number=1824879686.
Bizaer, Maysam. “Iran Satellite Launch 'Sends a Message' on Failed US Pressure.” News | Al Jazeera, Al Jazeera, 28 Apr. 2020, www.aljazeera.com/news/2020/04/iran-satellite-launch-sends-message-failed-pressure-200428102657189.html.
“Catalog of Earth Satellite Orbits.” NASA, NASA, earthobservatory.nasa.gov/features/OrbitsCatalog/page2.php.
Cohn, Carolyn. “Space Insurance Costs to Rocket after Satellite Crash.” Reuters, Thomson Reuters, 31 July 2019, www.reuters.com/article/us-space-insurance/space-insurance-costs-to-rocket-after-satellite-crash-idUSKCN1UQ1SK.
Hertzfeld, Henry R, and Ray A Williamson. “The Social and Economic Impact of Earth Observing Satellites.” Societal Impact of Spaceflight, by Steven J Dick, National Aeronautics and Space Administration, Office of External Relations, History Division, 2007, pp. 237–263.
Jakhu, et al. “The Outer Space Treaty and States' Obligation to Remove Space Debris: a US Perspective.” The Space Review: The Outer Space Treaty and States' Obligation to Remove Space Debris: a US Perspective, www.thespacereview.com/article/3370/1.
Jussawalla, Meheroo. “The Economic Implications of Satellite Technology and the Industrialization of Space.” Telecommunications Policy, vol. 8, no. 3, 1984, pp. 237–248., doi:10.1016/0308-5961(84)90008-9.
Keeter, Bill. “Space Debris.” NASA, NASA, 5 Dec. 2018, www.nasa.gov/centers/hq/library/find/bibliographies/space_debris.
“A New Firm Says It Can Link Satellites to Ordinary Smartphones.” The Economist, The Economist Newspaper, 7 Mar. 2020, www.economist.com/science-and-technology/2020/03/07/a-new-firm-says-it-can-link-satellites-to-ordinary-smartphones.
News Desk. “India to Launch Exclusive Satellite for Afghanistan.” Geospatial World, 12 July 2018, www.geospatialworld.net/news/india-launch-exclusive-satellite-afghanistan/.
“Rival and Excludable Goods.” Khan Academy, Khan Academy, www.khanacademy.org/economics-finance-domain/ap-microeconomics/ap-consumer-producer-surplus/public-and-private-goods/v/rival-and-excludable-goods.
Roper, Willem, and Felix Richter. “Infographic: LEO Satellites Fuel New Space Race.” Statista Infographics, 7 Feb. 2020, www.statista.com/chart/20770/number-of-satellites-in-space/.
Salter, William, Alexander. “Space Debros: a Law and Economics Analysis of the Orbital Commons.” 19 Stanford Technology Law Review, Stanford University, April 2016.
“UCS Satellite Database.” Union of Concerned Scientists, www.ucsusa.org/resources/satellite-database.
