Two years ago deceased Star Trek actor James “Scotty” Doohan was granted one last adventure, courtesy of Space Exploration Technologies Corporation. SpaceX, a privately funded company based in Hawthorne, Calif., had been formed in 2002 with the mission of going where no start-up had gone before: Earth orbit. In August 2008 SpaceX loaded Doohan’s cremated remains onto the third test flight of its Falcon 1, a liquid oxygen- and kerosene-fueled rocket bound for orbit. Yet about two minutes into the flight Doohan’s final voyage ended prematurely when the rocket’s first stage crashed into the second stage during separation. It was SpaceX’s third failure in three attempts.

Well, what did you expect? sneered old NASA hands, aerospace executives and the many others who hew to the conventional wisdom that safely ushering payloads and especially people hundreds of kilometers above Earth is a job for no less than armies of engineers, technicians and managers backed by billions in funding and decades-long development cycles. Space, after all, is hard. A small, private operation might be able to send a little stunt ship wobbling up tens of kilometers, as entrepreneur-engineer Burt Rutan did in 2004 to win the X-Prize. But that was a parlor trick compared with the kinds of operations NASA has been running over the years with the space shuttle and International Space Station. When you’re going orbital, 100 kilometers is merely the length of the driveway, at the end of which you’d better be accelerating hard toward the seven kilometers a second needed to keep a payload falling around Earth 300 kilometers up.

What, then, could the Obama administration have been thinking when it announced this past February that NASA should essentially get out of the manned-spaceship business and turn it over to private industry? Under the plan, NASA will write off most of the $9 billion invested so far in Constellation, the program to develop a replacement vehicle for the space shuttle capable of ferrying astronauts and supplies to the space station and, eventually, to the moon. Instead the agency will provide seed money to start-ups such as SpaceX, then agree to buy tickets to the space station on their rockets.

It is a naive and reckless plan, a chorus of voices charged. Among the loudest was that of former astronaut and space icon Neil Armstrong, who was quick to scoff at the notion that the private sector is ready to take over from NASA. “It will require many years and substantial investment to reach the necessary level of safety and reliability,” he stated. Leaving orbital ferrying in the hands of private companies, Armstrong and others insisted, would at best be setting the clock back on manned space exploration. And were private enterprise to drop the ball, perhaps even catastrophically, as many believe it would, the entire grand enterprise of sending people into space might come to a long-term or even permanent halt. Once NASA’s massive manned-spaceflight machine is dismantled, rebuilding it might take far more time and money than anyone would want to spend. Yet despite these concerns, Congress reluctantly agreed to the plan this fall.

But just because it is a big bet with real risks does not mean it is a bad bet. There are reasons to believe private companies could quickly rise to the task of getting people to orbit—and do it more cheaply and reliably than any big NASA-run program ever could. And that in turn could open the door to a prize that, thanks to a three-decade-long near stall in human space exploration, most people had almost stopped even dreaming about: a welcome mat above Earth not just for a small corps of astronauts but also for legions of scientists, engineers and even those of us who would simply get a really big kick out of spending a few days or weeks in outer space. Even better, the wave of space visitors could kick-start a self-sustaining orbital economy, one that would establish humanity’s place in space, including Mars and beyond, much more firmly than Constellation or any conventional space program ever could.

Letting Go
Relying on the commercial sector to build spacecraft would not be a new development, of course. The extraordinary vehicles that have carried NASA’s astronauts into space have always been developed and built by companies. What will change under the plan is the way NASA will work with private firms. As with the Pentagon, NASA hires contractors on a “cost-plus” basis, which means NASA reimburses them for whatever they spend and then tosses in a guaranteed profit.

Cost-plus contracting drives up costs and complexity, experts agree, because as more capabilities get tacked on to the project, contractors make more money and the agency lowers its risk of someday facing charges of compromising missions with penny-pinching. And that, many say, is how NASA’s human flight efforts ended up mired in low Earth orbit for nearly three decades with a billion-plus-dollar-per-flight space shuttle and, because the high costs severely limited the number of flights, not nearly enough to show for it. With Constellation, critics warned we could expect more of the same kind of waste.

A new pay-for-the-product model would not be without precedent, notes Paul Guthrie, a senior analyst at the Tauri Group, space and defense consultants in Alexandria, Va. Since World War II the U.S. government has made a point of investing heavily in industrial science and technologies with uncertain but potentially large commercial payoffs, Guthrie notes, and those sorts of investments paved the way for the biotech, computer and online industries, among others. As with the orbital-flight business today, those industries faced daunting technological and business challenges in their gestational stages but overcame them thanks to government programs that worked in much the way the new NASA plan does: by giving companies development money and serving as a guaranteed customer while the industry improves its products and develops economies of scale. The U.S. Department of Defense was the primary funder and customer of many microchip manufacturers in the early 1970s, for example, until Moore’s law and increased competition yielded astounding improvements in chip capabilities and pricing.

No one knows if there’s a Moore’s law for space travel, but there is certainly no law that requires it to remain expensive forever. Companies competing for business under the Obama plan would be forced to find ways to save money. If they go over budget, the difference comes out of their pockets; if they come in under budget, they keep the difference. In other words, a penny saved would be a penny earned, instead of one less government penny to spend and add to the “plus.”

SpaceX, the clear leader for now in the new space industry, has already been working that opportunity hard. It has cut the price tag of anodized aluminum bolts from $15 to 30 cents by machining them itself. It has slashed the cost of the carbon-based thermal material used in heat shields by coming up with its own formulation of the stuff, bypassing the industry’s lone supplier. It has eliminated the need to shell out big bucks for custom-formed tapered-diameter tubing used by the space shuttle to create turbulence-free rocket engine exhaust pipes by coming up with a design that smoothes the exhaust flow using cheap, constant-diameter tubing bent into a spiral shape.

To encourage this type of innovation, NASA has to let go. The agency has always told its contractors exactly how it wants its space vehicles built, yet under the new plan NASA would simply state what it wants a finished system to be able to do, such as safely ferrying a certain amount of weight into orbit. “We won’t be overly prescriptive in how we expect contractors to meet our requirements, we’ll just list high-level goals and give them maximum flexibility for how to meet those goals,” says Phil McAlister, a member of the NASA team in charge of program analysis. “Then at specific milestones we’ll be verifying that the requirements have been met, and we’ll provide whatever oversight is necessary to make sure.” To help companies keep the vehicles as simple and efficient as possible, the new NASA plan also dumps Constellation’s requirement that the orbital ferry be capable of continuing on to the moon. Instead the mission is just to safely and cheaply get people and cargo to the space station and back.

The elimination of the moon missions has drawn some fire, but those missions were really just dry runs for the real long-term goal of the exploration program: getting humans to Mars. And in spite of what some foes of the new plan have implied to the public, the plan does not call for NASA to spend less money on space or abandon its longer-term human space exploration plans. Rather the plan implicitly recognizes that a round-trip visit to Mars will require significant technological advances well beyond what Constellation would be likely to provide, and by freeing up NASA from having to spend all its money and expertise on orbital ferrying, the plan gives the agency the breathing room it needs to come up with those and other advances. “The plan represents a lowering of cost and better management of NASA’s low-Earth-orbit business, so that it can focus on research and development, Earth science and space science,” says Eligar Sadeh, president of Astroconsulting International, a space and defense consultancy in Colorado Springs, and a researcher with the U.S. Air Force Academy’s Eisenhower Center for Space and Defense Studies. In fact, the plan calls for NASA budget increases over the next few years. In many ways, the plan is an attempt to return NASA to its 1960s glory days by making it a true research and development agency again, farming out the been-there work of low Earth orbit to civilian contractors. It would make Mars the new moon.

Starting Up
The contractor incentives, the looser control and the resulting NASA savings would not in retrospect seem so smart if ­companies were to ultimately fail to deliver a safe, reliable orbital vehicle of the kind that Constellation could probably produce, if at much higher cost. Could the private sector come through? Though still too early to tell, there have been positive signs. In September 2008—just a month after the failed launch that broke up with the remains of James Doohan onboard—SpaceX’s Falcon 1 became the first privately owned liquid-fuel rocket to reach orbit. It was followed less than a year later by the orbit of the Falcon 9, a more powerful rocket designed to one day carry a crew vehicle.

SpaceX’s successful rocket tests are encouraging, but they are really the only hard evidence so far that private industry might succeed. The only other new player gearing up now to produce an orbital vehicle is Orbital Sciences in Dulles, Va., although at present it has little to demonstrate. Both are hiring some of the space industry’s most highly regarded managers and engineers, but it is impossible to know if either company will ultimately be able to come up with a good vehicle under reduced budgets and without hordes of NASA engineers providing detailed design specs.

Nothing says they cannot do it, though, and if given a chance they probably will, says John M. Logsdon, former director of the Space Policy Institute at George Washington University. The vehicles coming out of the effort would probably end up costing less than they would have under Constellation, Logsdon adds, although they will not necessarily be that much more reliable or efficient—at least not the ones produced in the next five to 10 years. “There’s likely to be some cost reduction in this first round because of reduced government oversight,” he says. “But in the next round we’ll see several other new players, and that may be where the real innovation comes in.” Among the upstart but potentially formidable space companies said to be gearing up to compete for contracts are Blue Origin, set up by Amazon founder Jeff Bezos; Armadillo Aerospace, founded by software mogul John Carmack; and Xcor Aerospace, founded by several veterans of the rocket industry.

And the industry will not just be limited to makers of orbital ferries. If lower transportation costs bring a lot more people into orbit, they are not likely to all find berths in the space station, a problem for which a solution eagerly awaits: Bigelow Aerospace in North Las Vegas has produced inflatable pods whose modular components can be transported to space and then assembled and pumped up to become orbital living quarters. Other companies are likely to emerge to provide space habitats, labs, storage and construction facilities. Yet more competition will come from governments around the world jumping into the new space race. Japan and India are already entering the fray with orbital launch capabilities.

Traditional aerospace contractors would probably compete as well for business under the Obama plan. Those giant companies can clearly build working space vehicles; the only question is whether they could build them under fixed-price rules and cost-cutting pressures. The United Launch Alliance (ULA), a joint venture of Boeing and Lockheed Martin, already launches payloads into orbit for $100 million—cheap compared with NASA launches. Although it is four times what SpaceX wants to charge, ULA has a reliability record to stand on. “When we work under fixed cost and don’t have the customer looking over our shoulder reviewing every little thing we do, we can run lean, too,” says Jayne Schnaars, Boeing’s vice president of business development for space exploration.

The Orbital Economy
The biggest potential payoff to the Obama plan would be the opportunity to drive the costs of a flight to orbit down low enough to create a virtuous circle: as prices drop, more people will fly, and as more people fly, economies of scale and increased competition will lead to lower prices, and so on. The circle would be reinforced when enough people fly to justify the creation of more infrastructure in orbit—that is, more places to stay and things to do—which would attract more people and lead to more infrastructure. And voilà: we’d have an orbital economy.

Would enough people line up for a ticket to make the ferries profitable and drive competition, cost-cutting and innovation? Without a clear path to real profit beyond what NASA would pay, there is no there there in space for the private sector. “It’s possible that space could be the next Internet, giving the U.S. a long-running source of economic growth,” says the Tauri Group’s Guthrie. “But looming over everything is the question of how those markets will develop.”

To be sure, a market already exists—the one the space shuttle has been servicing. The U.S. and many other countries will continue to be eager to send scientists and technicians to the space station to conduct zero-gravity health, biological or chemical research or to tweak equipment emplaced to observe Earth or space. (As part of the Obama plan, the life of the space station has been extended from 2015 to 2020.) If a newly competitive space industry can drive the cost of a taxi to orbit down toward $5 million, more countries will send more researchers. Still, that dramatically lower price is likely to be too high for most funding bodies. Whereas there may be dozens of takers every year, there will not be many hundreds.

The prospects for a thriving orbital economy would rise considerably if zero-gravity manufacturing looked as if it could be profitable. Today, though, the signs are not encouraging. The near absence of gravity—well, there is plenty of gravity, but objects in orbit are in free fall and don’t “feel” it—enables the production of unusually large and pure crystals, perfect ball bearings and other spherical products, and perfectly heterogeneous mixtures of chemicals. Regardless of the price premium such unusual products and substances might command, the cost of setting up and operating a plant in the sky and of getting supplies up and finished products back down, would wipe out that premium thousands of times over, at least for anything discovered so far. “Even if there were an asteroid made out of diamond somewhere nearby, the cost of getting to it, mining it and bringing the pieces back probably wouldn’t be justified as a business,” says Lon Levin, co-founder of XM Satellite Radio and president of SkySevenVentures, a Washington, D.C., venture capital fund that invests in space-related and other start-ups.

The mere possibility that some fantastically valuable pharmaceutical or nanomaterial that can be manufactured only in microgravity could be awaiting discovery should guarantee that some orbital taxi rides will go to industrial researchers looking for those applications. “The hellacious cost of getting to orbit has been what’s limited that area of experimentation,” says Boeing’s Schnaars. “As the cost goes down, there’ll be more and more of it, and if there’s enough of it there’s a better chance of finding one that succeeds.” It might only take one such discovery, Guthrie notes, to lead to a manufacturing operation big enough to provide a real boost to the orbital economy.

Still, most observers agree that the best bet for a potential near-term growth market is space tourism. Since 2001 Russia has flown seven tourists to the space station—one of them flew twice—via the Soyuz at prices ranging between $30 million and $50 million. At significantly lower prices, the number of takers would climb. “We have one and only one market fact, which is that the market demand for tourists to go to the space station is not zero,” Levin says. “We know there is a set of people who are willing to pay between $10 million and $20 million to get there. If the price were to head down toward $1 million, might hundreds of people buy a ticket? It’s possible, and that could make it a real business.” A lottery approach to selling some of the seats—where, for instance, $100 buys a one-in-10,000 chance of winning a ride—could further increase sales.

Levin and other observers also point out a darker roulette wheel at play: the chance that a budding orbital-tourism industry will suffer a mishap at some point and kill one or more of its customers. Should that happen, the space tourism business would instantly evaporate, asserts Sherman McCorkle, CEO of the investment consulting firm Technology Ventures in Albuquerque—just 150 miles north of where the state of New Mexico is building a $300-million “spaceport” in anticipation of a bustling spaceflight industry. “If the seventh tourist flight to orbit fails, there’s a high probability there will not be an eighth one for many, many years,” McCorkle says. “Entrepreneurs are used to dealing with failure by tenaciously fixing the problems after they come up, but that won’t work with space tourism the way it works with satellite communications.”

On the other hand, neither risk nor catastrophe would dissuade a large segment of the potential market, argues Scott Tibbitts, founder of the eSpace Center for Space Entrepreneurship in partnership with the University of Colorado. “Society looks at the risks of adventure tourism favorably,” Tibbitts says. “After eight people were killed trying to climb Mount Everest in 1996, sales of Everest expeditions to the public skyrocketed. No one talks about shutting down the skydiving business when a skydiver is killed. Tolerance for risk in space will increase, especially when prices come down to between $1 million and $5 million a seat. At those prices there could be a heck of a lot of people who want to fly as quick as a company can launch them.”

Unless some alternative soon presents itself, tourism is likely to be the linchpin of the orbital economy—and for at least a few years, that could be slow-going. “It’s clearly a limited market for the foreseeable future,” Logsdon says. Adventure tourism for multimillionaires may seem like a superficial and fickle peg on which to hang our dreams of space exploration, but it makes a certain sense. Capitalism is the most powerful tool humanity has yet devised; the drive to push beyond our earthly home is our most ambitious project. The best way to achieve one may be to hitch a ride on the other.