Last Friday, Burt Rutan, aircraft designer extraordinaire, announced that he's building a vehicle to compete for the X-Prize.

Because of his biography, suddenly the prize and attempt are being taken seriously. After all, he's the man who built the first aircraft to circumnavigate the globe nonstop, without refueling, so when he says that he's going to do the seemingly impossible, or at least improbable, people listen.

Why is this important?

Several years ago, the X-Prize was originally offered (though not fully funded until a few months ago). The intention was to provide an incentive to entrepreneurs to seek a $10 million prize to deliver a low-cost suborbital ride into space. This was important because the prevailing wisdom was that spaceflight for humans was impossibly expensive.

The idea was to follow on from the tradition of the Orteig prize that resulted in Charles Lindbergh's historic solo non-stop flight from New York to Paris. The Orteig Prize was only $25,000. Even considering inflation, it reveals something about modern aerospace technology (or, at least, practices) that it was necessary for the X-Prize to be 400 times that amount in order to provide a significant motivation for contestants.

One of the interesting things about prizes is that they can have a tremendous leveraging effect. That is, they may result in much more money being spent than the value of the prize. For example, if there are 10 teams competing, even if none of them spends as much as the prize on their effort, it will still be many times as much as the prize itself.

And they may actually spend more, because they can be motivated by other considerations than the cash itself, such as pride and ego, or the hope of a commercial offshoot. It is rumored that the Rutan concept costs on the order of $20 million — twice the size of the prize.

We might have seen some of these concepts revealed sooner, had the prize been fully funded sooner. But it was only in the past few months that the full amount was secured. This was done by, in essence, making a wager with an insurance company. The X-Prize Foundation put up the few million dollars that it had raised to date, and bought a policy that would pay off $10 million if someone won the prize by the end of 2004. If no one did, the policy would expire, and the money would go to the insurance company. The Foundation is betting that someone will win by the deadline, and the insurance company is betting that they won't.

I'm wondering if, seeing Burt's rollout event last week, the insurance company is getting nervous about having made a bad bet. It's not one that I would have recommended taking, had they asked me. But I suspect that they asked the usual aerospace industry suspects and NASA, who probably told them that it was safe. After all, everyone knows that no one except a major aerospace company or a government space agency could build space vehicles, and they weren't eligible for the prize, which required totally private efforts.

If Burt, or someone else does achieve the goal, it will make the insurers smarter next time someone wants to raise prize funding, and hence it will be more difficult to do this again. But it will also help change the perception of the general public and investors, which is one of the main things that has been holding back the development of private passenger spaceflight, largely for the better.

And it points out, once again, that technology is not the difficult part of doing this, despite NASA's continual claims to the contrary. If the vehicle that Burt is building were to carry passengers per the standard FAA regulations for aircraft, it's estimated that it will cost between $200 million and $400 million to certify it. That is, it will cost 10 times as much to get it certified as it did to develop, prototype and flight-test it. Given the current nascent state of the industry, such certification is both unaffordable and unreasonable.

This raises the question as to whether or not the standard aircraft certification route is appropriate for a new type of pioneering transportation. Certainly, had the current FAA regulations been in place in the 1920s and 1930s, the aviation industry would have been stillborn.

Fortunately, there may be alternative ways of getting FAA approval to such a certification. If such a vehicle is classified as a launcher, rather than an airplane, it can get a launch license through the part of the agency that does that, rather than certification from the different part of the agency that handles that.

However, this will establish some new precedents as well. Launch licenses are a well-understood process for expendable launch vehicles delivering cargo. They have never been issued for reusable vehicles, nor have they ever been issued for passenger vehicles.

I've noted previously that there's an air of uncertainty over the regulation of passenger spaceflight right now. The FAA still hasn't fully settled which parts of the agency are going to regulate this transition phase of the development of spaceflight, in which sometimes a vehicle is an aircraft, and sometimes a spacecraft.

This is a big problem because if there's anything that investors hate more than risk, it's uncertainty, particularly uncertainty about future government actions. As long as this issue remains unresolved, it will continue to hamper needed investment in this fledgling industry. With at least two serious funded X-Prize competitors, who are planning to, and will have to fly within the next couple years to achieve their goal, we can't afford to have the Department of Transportation continue to dither on this issue.

If the government wants to encourage the development of this vital step toward becoming a truly space-faring civilization, they need to make a decision — one that encompasses an intelligent balance between acceptable risk and innovation — very soon. Without one, it may still happen, but like many other industries, it just may be chased off shore.

Rand Simberg is a recovering aerospace engineer and a consultant in space commercialization, space tourism and Internet security. He offers occasionally biting commentary about infinity and beyond at his Web log, Transterrestrial Musings.

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