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Virgin Galatic flight
The commercial spaceflight industry has benefited from a limited regulatory regime that offers lessons for other industries. (credit: Virgin Galactic)

Zero-gravity regulations

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Journalists have filled headlines about the “ultrarich” taking costly field trips to outer space. The issue of space tourism, seemingly frivolous to some, provides important insights into US regulations on innovation (see “The normalization of space tourism,” The Space Review, October 18, 2021.) For 20 years, the US government took a laissez-faire approach to regulating space tourism. The planned sunsetting of the “learning period” section of the US Commercial Space Launch Competitiveness Act of 2015 signaled a new age of regulatory hurdles. Markets have responded positively to the boom in space innovation, but can the industry continue to flourish under oncoming regulations?

Though members of Congress develop regulations to reduce risk, safety is already one of the pivotal interests of space tourism companies; without it, they would not have a customer base, particularly not any repeat customers.

In the early 2000s, space industry growth took off, as did concern in Congress about private companies’ ability to operate and innovate under regulatory barriers. In an unusual step for the US federal government, Congress passed the Commercial Space Launch Amendments Act in 2004, reducing regulatory pressure on the fledgling space tourism industry. Some of the law’s key elements were the streamlining of regulatory authority on space tourism to one entity, the Federal Aviation Administration, and the establishment of a moratorium on safety regulations for commercial space passengers. Government officials argued they did not have enough information to create appropriate and effective regulations and took a step back. The bill imposed an “informed consent” framework on companies, like the agreements in activities like skydiving. Beyond that, companies could operate relatively freely when sending non-astronaut civilians into space.

Congress renewed the moratorium in 2015 but planned for it to sunset in October 2023 after the FAA and RAND Corporation reported they had gathered enough information about space tourism to begin making regulations for the safety of commercial spaceflight participants. (There have been several short-term extensions of the learning period, now to early May, as Congress works on a long-term FAA reauthorization bill.)

Last summer, after the release of the RAND report, the FAA established a group to begin generating formal commercial spaceflight standards in preparation for the bill’s sunset. The FAA views these safety standards as essential to the industry’s continued growth. Regulations will likely focus on the areas of informed consent, training guidelines, medical screening, commercial liability, and accident investigation jurisdiction. During the moratorium, the FAA actively promoted the development of voluntary consensus standards among private companies and plans to incorporate these elements of consensus into the new regulations. However, planning to regulate suggests an insincere faith in the ability of the private sector to “govern” itself and opens up the opportunity for regulatory capture.

Though members of Congress develop regulations to reduce risk, safety is already one of the pivotal interests of space tourism companies; without it, they would not have a customer base, particularly not any repeat customers. Past experience has already shown that regulations do not eliminate all risks or tragedies. Both business and government care about passenger safety; the question lies in which entity can best ensure it. New innovations mean, as one report stated, “a ride on SpaceX’s Crew Dragon capsule is about three times safer than a ride on NASA’s space shuttle was in the final years of its operation.” Even though passengers under the moratorium made their own informed-consent decisions about commercial space travel, the FAA still required spacecraft to undergo an approval process to carry human passengers. With some peace of mind about safety, the full scope of the regulation issue can be better understood.

Key players in the space industry decry the potential end of the moratorium and point out ways their industry already bears heavy non-safety related regulation. For instance, Bill Gerstenmaier, SpaceX’s Vice President of Build and Flight Reliability, noted, “Licensing, including environmental approval, often takes longer than rocket development.” He added, “We should be the ones that are driving the development, not being driven by regulatory oversight.” The business community fears increased regulatory hurdles.

If an absence of regulations turbo-launched space tourism innovation, how might the maritime, rail, and medical fields similarly benefit?

In contrast, A RAND Corporation representative pointed out the rarity of the moratorium, stating, “It’s not something that other domains have had — aeronautics, maritime, rail, medical — yet those industries are also competitive.” Yet, how much more innovation might we have had in those industries under a more voluntary regulatory approach? Consumers in the domains mentioned by the RAND representative have experienced benefits from deregulation, such as the airline industry in 1978, the railroad industry in 1980, and the significantly more complicated telecommunications industry. Reduced regulations aided impressive advancements in space tourism, while companies voluntarily followed and advanced time-tested safety practices.

The Commercial Space Launch Amendments Act produced a valuable controlled experiment. Regulations cover most activities in the industry, with only the area of space tourism left partially unregulated. The example of established, heavily regulated industries should not be used to justify increasing regulation on the nascent space industry. Instead, consider what policymakers can learn from this recent experiment. If an absence of regulations turbo-launched space tourism innovation, how might the maritime, rail, and medical fields similarly benefit? Hausman and Taylor argue, “Facilities-based [firm level] imperfect competition (and it can be highly imperfect) provides greater consumer welfare than imperfect “regulation forever.”

With this argument in mind, new guidelines warrant concern. As history demonstrates, the regulation process is slow, and once created, regulations persist almost indefinitely. For example, in the intensely weakened maritime industry, the century-old Jones Act has seen almost no significant changes despite numerous reform attempts. New guidelines on space tourism will undergo an approximately five-year approval process with finalized guidelines anticipated in 2028 and implementation and enforcement lags to follow. Keeping up with guideline development will be crucial for companies competing in the industry, adding further costs and hindrances to innovation in space technology.

Members of Congress should return to encouraging voluntary consensus standards among private companies instead of imposing blanket regulatory standards. Rather than ending the successful unregulated “learning period” for improving commercial spaceflight, Congress should expand this moratorium to other elements of the still burgeoning space industry, such as launch regulations and beyond. Instead of responding to imagined or precautionary risk scenarios, members of Congress should acknowledge the innovation and norm development already present in the successful private space industry as a testament to the power of taking a backseat on regulatory affairs whether in space, on land, or at sea. Giving innovators room to breathe absent extreme regulatory pressure would keep a new era of groundbreaking innovation in orbit, providing new opportunities for US and global citizens alike.

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