Tighter export controls triggered by fears of Chinese espionage are crippling the U.S. satellite industry and undermining American technological supremacy at a time of fierce global competition.
In nearly two years since Congress imposed additional export restrictions on commercial satellites, the U.S. share of the global market has plummeted from 75% to 45%, according to the Satellite Industry Assn., a Washington-based trade group.
This marks the first time that the U.S. share has fallen below 50%, with the preponderance of the impact falling on California's long dominant spacecraft manufacturers.
Industry and military experts warn that further erosion of America's decades-long dominance of the global satellite industry poses a serious threat to this country's long-term commercial and military competitiveness.
The drop has been so severe that some of the staunchest supporters of the tougher export controls concede that Congress--led by conservative Republican legislators from California--may have gone too far.
The lawmakers are even considering reversing some of their hastily imposed restrictions, which forced companies to obtain thousands of separate government licenses. The original impetus for the rules, involving allegations that U.S. firms gave China information critical to its missile program, has been widely disputed.
It was in response to criticism that U.S. companies were transferring sensitive technology to China that Congress moved oversight of export licensing from Commerce to the State Department in March 1999 and reclassified commercial satellites and related components as munitions.
U.S. satellite makers complain that having commercial satellites classified with tanks, missiles and bombs has resulted in time-consuming and expensive licensing delays and denials, which have caused their customers--even U.S.-based Intelsat, GE American Communications and Inmarsat--to turn to more reliable suppliers in Europe.
The State Department, for its part, maintains that the export licensing process has improved in the last six months, with the average number of days it takes to acquire a license dropping dramatically.
Contracts Canceled, Business Lost
Last year a Singapore mobile telecommunications company canceled a program to buy two communication satellites worth $450 million from Hughes Space and Communications, now Boeing Satellite Systems, after the State Department objected to launching the satellites on a Chinese-made rocket.
And earlier this year, the Canadian Space Agency backed out of a $75-million contract with a Herndon, Va.-based Orbital Sciences Corp. subsidiary to provide a satellite component, citing frustration with the export restrictions. The contract was subsequently awarded to an Italian firm.
In all, the number of publicly reported orders of U.S.-made geostationary satellites, the most popular type, dropped from 16 in 1998 to 13 so far this year while orders for European spacecrafts rose from 6 to 16 in the same period. Each satellite can cost up to $250 million.
Such losses come at a time when European governments are aggressively promoting aerospace development, leading to a marked improvement in the quality and price of satellites made by Astrium, formerly Mastra Marconi Space, and France's Alcatel Space, two leading foreign competitors.
"While others are preparing to become more competitive in this market, we're shooting ourselves in the foot," said John Logsdon, director of the Space Policy Institute at George Washington University.
Moreover, if weakened U.S. satellite makers cede this market to foreigners it will jeopardize America's global surveillance, reconnaissance and communications network, the linchpin of the Pentagon's 21st century battle plan, security specialists say.
To an increasing degree, the U.S. military depends on private aerospace technology to monitor North Korean troop movements, locate suspected Iraqi weapons facilities or eavesdrop on foreign governments.
"This was a feel-good solution that over the long run probably hurt American security," said Loren Thompson, a defense analyst at the Washington-based Lexington Institute, a conservative think tank.
The implications are particularly ominous for California, home of the world's leading satellite makers, including Boeing Satellite Systems, Loral Space and Communications and Lockheed Martin Co.
Over the past three decades, the state has provided nearly two-thirds of the world's telecommunications satellites, has hosted 90% of the world's polar launches and has been a leader in NASA and Department of Defense-sponsored aerospace research at such academic institutions as UC Berkeley, Stanford University and Caltech.
"Some of the things that have fallen under export controls are the keys to California's economy," said James Mulvenon, a China military expert at the Rand Corp. and critic of the satellite controls.