TheChek News Flow

LONDON, April 10 (Reuters Breakingviews) - European governments know they need a viable alternative to SpaceX. But it will take more than state largesse to build a rival to Elon Musk’s satellite behemoth. The continent’s space sector also requires supportive policy, new technologies and far greater ambition.

Europe has been worrying about its dependence on U.S. satellite services for communications and intelligence for some time. The risks of this reliance became acutely apparent in February, when Reuters reported that U.S. officials had threatened to shut off Ukraine’s access to SpaceX’s Starlink internet system, a vital resource in the country’s war with Russia. Musk later said the article was “false”. Even so, the episode underscored the urgent need for Europe to beef up its own satellite capabilities.

Now the European Commission wants to take matters into its own hands. A white paper published last month recommended that the bloc, opens new tab fund Ukraine’s access to space services from homegrown providers. Europe’s largest satellite operators also confirmed they’re in talks with government officials about providing backup connectivity to the war-torn country.

But if the continent is to develop a sovereign space industry independent of U.S. influence, it will need to go further and develop a company - or a coalition of firms - with all the capabilities of SpaceX.

The U.S. company is a juggernaut. In just six years, it has used its own rockets to launch some 8,000 satellites into orbit, where they beam broadband signals down to customers. Users range from households to airlines and armies. According to Bloomberg, SpaceX was valued at $350 billion, opens new tab at the end of last year.

SpaceX admirers ascribe its dizzying ascent to a combination of cost-saving design and vertical integration, meaning it manages a lot of its manufacturing in-house. External suppliers make some small parts for the company’s rockets and satellites, but design and final assembly is SpaceX’s responsibility. The group’s reusable rockets help it control launch costs. It has also benefitted from government contracts with a value of $22 billion, CEO Gwynne Shotwell said in February. The Pentagon awarded it deals worth a further $6 billion last week.

It won’t be easy for Europe to replicate SpaceX’s success. The bloc does not have a single company striving to design, build, launch and operate its own rockets and satellites. Rather, it has a patchwork of space firms with strengths in some areas and weaknesses in others.

Nor are Europe’s richest citizens putting their personal fortunes at risk. Musk kept SpaceX afloat prior to its first major NASA contracts, and long before it was attracting billions from private sector backers. Project Kuiper, Amazon.com’s (AMZN.O), opens new tab planned constellation of 3,000-plus satellites, has a deep-pocketed backer in Jeff Bezos, the e-commerce giant’s founder.

Europe doesn’t necessarily need many thousands of satellites to be self-sufficient in broadband beamed from space. It does, however, need to be capable of building, launching and operating its own constellation. When it comes to building satellites, the continent can draw on existing expertise. Aerospace giant Airbus (AIR.PA), opens new tab, France’s Thales (TCFP.PA), opens new tab and Leonardo (LDOF.MI),

opens new tab of Italy have started talks with EU antitrust authorities about a possible merger of their satellite divisions.

Getting those objects into space is trickier, however. Europe has just two operational rockets, both owned and operated by France’s Arianespace, which have only managed a handful of successful launches between them.

As well as communication satellites, Europe also needs to build up its satellite intelligence. When the Trump administration suspended intelligence sharing with Ukraine last month, Kyiv lost access to crucial information collected from space. The country’s military relies on images from U.S. National Geospatial-Intelligence Agency (NGA) to survey damage and track the movements of Russian forces. While Europe has some spy satellites that could help, their capabilities are more limited.

The American advantage is partly about money. According to consultancy Novaspace, global space investments by governments reached around $135 billion last year, with the U.S. accounting for $80 billion. Of that, the country spent an estimated $45 billion on defence, with the remainder going to civil space programmes like NASA.

Europe’s spending is puny by comparison. Trade association Eurospace totted up 11.4 billion euros ($12.6 billion) in total space spending by the bloc last year, with just over 1 billion spent by national militaries. Besides, the funding of military space initiatives in the bloc is still largely decided at the national level, making cross-border efforts tricky to coordinate.

Those difficulties are evident in the commissioning process for IRIS2, a planned constellation of 290 communications satellites billed as Europe’s sovereign answer to Starlink. Announced in 2022, the project was beset by delays and funding disputes, with German officials raising concerns about costs and the uneven division of labour between member states. Contracts were ultimately signed last December and three satellite operators – SES, Eutelsat and Hispasat – are taking the project forward.

The total cost of IRIS2 amounts to 10.6 billion euros, with 6.5 billion euros coming from the public wallet via the European Commission, member states and the European Space Agency. The constellation’s trio of operators are due to put up the rest. Eutelsat, which has a market capitalisation of just 1.7 billion euros and net debt of 2.1 billion euros, is expected to invest 2 billion euros. But analysts question whether the company can afford to do so as it must also upgrade existing satellites and refinance debt, while grappling with declining revenue.

The project may also struggle to sign up civilian users, as Starlink has done. Eutelsat expects to generate 550 million euros in annual revenue over the 12 years of the IRIS2 contract. New Street Research reckons this implies a wholesale price of 23 euros per month for 1 megabit per second (Mbps) of dedicated bandwidth. By comparison, Starlink currently offers residential internet connections in France and Italy with typical bandwidth of 100 Mbps for around 40 euros a month.

Governments seeking a home-grown satellite communications service might be willing to pay up, but consumers and businesses may not. Eutelsat and its partners need commercial users because the European Union has not fully guaranteed their revenue. As it stands, the bloc has committed to buying capacity “worth several hundred of million euros” a year.

Europe now faces a choice: it can mobilise the capital, technology and political will necessary to build a sovereign space sector, or it can stand by as the U.S. and China made ever-larger strides. It may not be possible to match Starlink for size and speed, but it is possible to build secure space services that European governments want to use. Doing so will require feats of diplomacy and engineering - as well as plenty of financial fuel.