Canada keeps its eye on the sky with its taste for space
This article originally appeared in the Financial Post on Monday, January 9th, 2012
By: Danny Bradbury, Financial Post
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In space, no one can hear you invest — but Canadians are doing it anyway. Take Urthecast, a Vancouver-based firm with a taste for space: It’s betting $10-million on two cameras that are being built by a British partner.
Late next year, a Russian mission will fly them to the International Space Station, where they will be installed to beam pictures and constant, near-live video to Earth. The revenue model? Data sales and advertising.
Space has played a large part in Canada’s history. When the country launched the Anik A1 communications satellite in 1972, it became the first nation to have a communication satellite in geostationary orbit.
“It was the thread that brought this country together as much as the railroad,” says Mark Burbidge, head of industrial policy at the Canadian Space Agency.
Back then, small steps for man required big bucks. Forty years on, it takes less effort and money to do things up there, says Scott Larson, chief executive of Urthecast.
Consequently, he contends government influence is waning.
“People in the private sector can get things done cheaper, better and quicker,” he says.
“Whether it’s for tourism, cargo or Earth observation, there is the mindset in the space industry that we don’t need massive budgets,” says the Canadian Space Agency’s Mr. Burbidge.
As evidence the Canadian government’s financial influence in the space industry is waning, data show it contributed 18% to domestic space revenue in 2010 — half what it contributed in 1996. The sector enjoyed some funding boosts in the past few years via government stimulus packages and specific project financing, but government spending now is projected to drop in the next three years.
Mr. Larson and others like him might be looking to tech and travel moguls from overseas for inspiration. Britain’s Richard Branson has Virgin Galactic, his VIP space travel firm, while PayPal founder Elon Musk has invested his millions in SpaceX, a commercial rocket firm. U.S.-based Bigelow Aerospace is attempting to put large inflatable hotels in orbit, and Space Adventures has been offering International Space Station flights to the rich and famous using Russian rockets since 1998. Now, Amazon’s Jeff Bezos is working on a vehicle designed to get people to the edge of space and beyond.
Some of these companies are targeting nascent revenue opportunities entirely outside the conventional governmentfunded projects, such as space tourism. There are other revenue streams, such as hosted payloads for commercial satellites. But a lot of money is still coming from services provided for government. SpaceX’s launch manifest is littered with government payloads, for example.
“Most projects are government backed with significant amounts of money,” says Magued Iskander, executive vice-president and general manager of information systems for Richmond, B.C.-based MDA Corp. “The government is the anchor customer to allow for writing off a significant portion of cost,” he says.
MDA has direct experience with this type of government funding. The space robotics division it acquired from Toronto-based SPAR in 1999 had developed the Canadarm for the Space Shuttle, under contract to the Canadian National Research Council. This turned into a further four sales, generating $900-million in exports.
The more groundbreaking a company’s technology is, the more important government dollars are, says Dr. Jean de Lafontaine, founder of 10-year-old Sherbrooke, Que.-based space services company NGC Aerospace.
Like many sectors, the space industry has a scale for such things. The technology readiness level (TRL) involves a scale from 1 to 9. The lower the TRL rating, the further from commercial deployment it is. NGC works on projects with a TRL of 1 to 6, and finds itself dealing with the CSA a lot.
“The other problem with space is that the return is often more scientific,” says Mr. Lanfontaine, explaining why private-sector investment is difficult to find for some projects. “The closest I see in terms of private exploitation are things like space travel.”
However, Mr. Iskander says even this still needs government involvement. “The right thing to do is for the Canadian government to invest in the next crew vehicle. Right now, it’s all about orders from the U.S. government,” he says.
Mr. Burbidge says the Canadian Space Agency simply doesn’t have the money for such projects. Its goal is to find a role for Canada in larger projects, to generate exports. That was how the Canadarm came about. “That got our astronauts up there,” he says, of the agreement with NASA.
“Earlier this year, the four largest space companies in Canada, MDA among them, published a report criticizing the federal government for various shortcomings, including not targeting research and development dollars into areas of key economic activity. This oversight “leads to Canadian industry being at an extreme disadvantage in export markets,” they said, adding that the government should switch funding from universities to companies in the late stages of R&D.
Having been launched by the government in its early stages, perhaps the Canadian space industry is gearing up for its second-stage booster. Revenue grew by 38%, gaining 14% last year alone. We are relying less on the government for domestic revenues than we did, and our exports are growing at a healthy clip.
That said, the areas that could benefit the most from government funding — smaller firms working on high-risk technologies — could do with the most government help. In 2009, there was increased competition from newer, younger firms, but in 2010, most of the revenue growth Canada’s space industry saw was restricted to the largest companies in the sector.
That isn’t stopping Mr. Larson. He expects his cameras to be in orbit and beaming high-definition video to Earth in a year’s time.