We Should Not Balkanize the Space Economy | American Enterprise Institute
Low Earth Orbit satellites are making the world safer and more connected. Now, a proposal under consideration by the European Commission threatens a long-established system of regulatory reciprocity by reserving roughly two-thirds of the 2 GHz mobile satellite services (MSS) spectrum band exclusively for European operators, leaving only one-third open to global competition.
This move appears to be part of the EC’s drive towards technological sovereignty, a multiprong effort to make Europe nearly independent in AI, cloud, chips, digital platforms, and data services. This MSS proposal would heavily restrict European consumers’ abilities to choose services from American LEO leaders like SpaceX or Amazon.
This has consequences for both Americans and Europeans. Government officials in Europe and the US independently assign radio spectrum for terrestrial wireless networks, like cellular services, using competitive auctions. Providers use cellular networks to provide service and achieve scale economies on a country-by-country basis.
This is not how Low Earth Orbit satellite systems work. Because a typical LEO takes only 90 minutes to orbit the earth, thousands of LEO satellites are required to offer continuous coverage over a broad area; SpaceX has over 9000 LEOs in orbit—Amazon is targeting to have over 7000. These systems depend on worldwide scale, which is why providers are racing to build their satellite clusters.
Because launching satellite clusters requires high upfront capital expenditures, providers must recover costs quickly, amortizing them over as many customers as possible. Restricting American satellite providers access to major markets raises average costs, slows deployment, and ultimately reduces investment, making LEO services unnecessarily costly for Europeans and Americans alike.
The EC proposal would fundamentally inhibit the valuable services that LEOs provide: broadband connectivity to millions of people living in remote areas; networks for cars, trucks, ships, planes, and other platforms in motion; relief services for people experiencing natural disasters and conflict; and extended cellular, cloud, and AI services. People—especially marginalized groups—will lose these benefits if restrictions on market access make them prohibitively expensive.
Europe has previously adopted digital regulations that intensified business restrictions and increased costs, making it harder for small firms and startups to compete, and shrinking Europe’s role on the digital stage. Some might view this as an honorable tradeoff, but the MSS proposal again raises an important question: how much should consumers be forced to pay for technological sovereignty?
Political pressure for a regulatory response is already emerging in Washington. The FCC has opened a proceeding asking whether access by foreign satellite providers should depend on reciprocal treatment abroad, but a transatlantic satellite trade war would weaken both American and European economies.
Perhaps a better response would be to encourage business arrangements between satellite providers that permit both scale economies and a “parting of ways” if things go badly. Trade and contractual agreements can provide governments with assurances of long-term commitments and security protections.
Absent such agreements, Europe’s plan may give it greater domestic control, but at the cost of a lower quality of service and less innovation. American firms would lose access to valuable customers. Both European and American satellite providers would encounter costly difficulties in serving global clients.
Oddly, the primary beneficiary of a satellite trade war could be China. Two related Chinese projects have state support and plan a total of 27,000 LEO satellites. Restrictions on US providers risk creating unwarranted opportunities for these providers.
This may not be a popular perspective with the EC, but the US and Europe need not excel in the same parts of the satellite ecosystem. Comparative advantage suggests that both economies become richer when firms compete globally and specialize where they are most productive. Fragmenting markets reduces those gains by forcing firms to duplicate investments and limiting opportunities to exploit economies of scale.
The US and Europe have a mutual interest in a shared, robust LEO infrastructure, created and run by private companies, focused on serving customers. The economic, security, and safety benefits are worth pursuing.
