Monday, February 03, 2014

Will Canada Support the Growth of Small "NewSpace" Companies?

          by Chuck Black

David Emerson. Still batting 2 for 3? Photo c/o APFC.
As outlined in the January 31st, 2014 Canadian Press article, "Ottawa to announce new Canadian space policy Feb. 7," Industry Minister James Moore is expected to announce a new Federal space policy on Friday. This policy is intended to define and guide the future actions of the Canadian Space Agency (CSA), although its direct impact on Canadian businesses remains less clear.

The core of this new policy is expected to be derived from the David Emerson led Aerospace Review, the November 2012 arm's length review of the aerospace "and space" industry which has had much success in getting its first volume of recommendations relating to "Canada's Interests and Future in Aerospace" adopted as Federal government policy.

Of course, what you see ain't always going to be what you get.

As described in the March 24, 2013 blog post "Emerson's Space Plan Versus the Canadian Budget," the big Emerson successes so far have been the $1Bln CDN commitment to five years' funding for the Strategic Aerospace and Defence Initiative (SADI) and the smaller, $110Mln commitment to fund the new Aerospace Technology Demonstration Program (ATDP). Both these programs, while useful to the Canadian aviation industry (especially larger, established aerospace firms like Bombardier), are of little use to the small firms which typically comprise the Canadian space industry.

James Moore now at bat. Photo c/o Postmedia.
But it appears likely that the second volume, relating to "Canada's Interests and Future in Space," is not going to be adopted by the ruling Federal Conservative party in its entirety, especially the recommendations relating to supporting small aerospace businesses and start-ups with innovative ideas and a commitment to keeping jobs in Canada.

This is odd, given that this is the sort of policy tailor made for promoting the Conservative agenda.

Of course, Minister Moore appears already to have tipped his hand. The December 2nd, 2013 post "Industry Minister Responds to Emerson "Space" Recommendations," noted numerous differences between the original second volume of the Emerson review and the policy changes the Industry Minister was recommending.

Most important of these were:
  • The perception that the crop of current Canadian commercial space players has grown up "in an atmosphere of limited competition and in some cases, excessive reliance on government spending," with an acknowledgement that this needs to change (Page 26 of the second volume of the aerospace review). This type of comment, quite noticeable in the original Emerson review, is no where to be seen in recent government pronouncements, which tend to favor the current crop of commercial space players which Emerson disparaged 
Is CSA president Walt Natynczyk "encouraging?" Photo c/o CSA.
  • A recommendation for "encouragement" of commercial space activity. According to the report "some of these ideas may prove fanciful, but others may be visionary and produce tremendous profits for their proponents and the companies in which those proponents operate. The R&D support recommended previously (the CSA technology development program and others listed on page 41 of the second volume of the aerospace review) will help stimulate development of the most promising proposals, but its impossible to know with certainty whether a notion which appears unrealistic today might lead to tomorrows breakthroughs. Without endorsing specific speculative projects, public policies and programs can create the conditions for entrepreneurs and researchers to test and pursue creative approaches and, in so doing, jump start Canada's private space activity at a time when the global commercial space business is gaining momentum." (Page 43 of the second volume of the aerospace review). Again, this type of comment, quite noticeable in the original Emerson review, is no where to be seen in recent government pronouncements, which tend to favor the current crop of commercial space players.
  • A commitment to double the current support for the Space Technologies Development Program (STDP) a CSA program to provide initial funds for breakthrough technologies "to reach $20 million annually by 2015–16." This amount is substantially less than requested by the Emerson review, which recommended an additional $10Mln per year over each of three consecutive years, for a total of $30Mln in new funding, in addition to the existing $5Mln annual budget (as per page 41 of volume two of the aerospace review). The Conservative government attitude toward STDP is also out of step with the far larger funding recommendations related to SADI and ATDP in volume one, which were adapted as government policy almost without question.
To download the Aerospace Review, please click on the graphic above.
And Emerson wasn't the only person to notice the importance of small business in building innovative Canadian companies.

The Conservative government's lack of support for small aerospace businesses goes back half a decade and was first publicly noticed by investment bank Near Earth LLC in its 2009 white paper on Small Aerospace Companies: Space Activities in North America and Europe.

As outlined in the July 19th, 2009 post "Canadian Space Agency Provides "No Dedicated Programs" to Support Small Aerospace Firms," the Near Earth report stated that, "when compared to organizations like the National Aeronautics and Space Administration (NASA), the National Oceanic and Atmospheric Administration (NOAA), the European Space Agency (ESA) and others, the Canadian Space Agency (CSA) has "no dedicated programs for small business.""

Of course, these small business and "NewSpace" companies being ignored by the Canadian government are also the international firms essentially responsible for the current growth of the international space industry, a boom which is bypassing the shrinking Canadian space industry, and was described in the January 24th, 2014 post "Canadian Space Industry Shrinks While International Markets Grow!"

Will the Federal government figure this out in time for Friday's announcement or will the Canadian space industry continue to slowly contract in the face of expansive international opportunities?

Stay tuned...

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