“This Could Be Our Biggest Economy”: Former Space Commerce Director Kevin O'Connell on Transforming Space from Government Domain to $1.8 Trillion Market

In 2020, a chef walked into a government workshop on the future of space. The room full of engineers and executives fell silent, wondering if she'd come to the wrong place. "I understand food tastes terrible in space," she announced, "and I'm going to fix it." For Kevin O'Connell, then Director of the U.S. Office of Space Commerce, it was a perfect example of what the space economy was still missing: normal businesses solving everyday problems in space.

After four decades shaping space commerce across roles at the Department of Defense, State Department, National Security Council, and RAND, O'Connell has emerged as one of the most influential architects of the modern commercial space industry. His revolutionary reforms as America's principal advocate for commercial space from 2018-2021 opened the floodgates for private investment. Now, as founder of Space Economy Rising and recipient of the 2024 USGIF Lundahl-Finney lifetime achievement award, O'Connell sees an unprecedented opportunity: a $1.8 trillion space economy by 2035, built not just by aerospace giants, but by entrepreneurs bringing Earth's innovation to the stars.

In this conversation, O'Connell reveals how the next wave of space commerce will transform the final frontier into humanity's greatest economic opportunity.

During your tenure as Director of the Office of Space Commerce, what emerging market opportunities do you see being overlooked by current industry analysts and investors?

"At the top level, we're in the middle of an extraordinary transformation from a traditional state-run space business to one that is largely dominated by the private sector," O'Connell explains. "The industry currently generates roughly $600 billion annually and is projected to reach $1.8 trillion or more by 2035. But I think we do a disservice when we only look at those top-level numbers."

"One of my key initiatives at Commerce was collaborating with the Bureau of Economic Analysis to enhance the quality of space-related economic data," he notes. "What do I mean by that? It doesn't mean that good people aren't trying to do good work. If I tell you something is part of the space economy, you might be skeptical—yet around 50% of the apps on your phone are probably linked to space. We use space between 20 and 100 times a day, depending on who we are. And I just think it's analytically very difficult to count it."

"I'm an optimist," he continues. "I believe we could generate more economic value from space activities in our lifetime than in all previous human history combined. But this isn't guaranteed. I don't want to be seen as someone who's just blindly optimistic. What I'm saying is there's a lot of hard work to be done."

During his tenure at Commerce, O'Connell prioritized private sector financing. "By the end of 2021, we saw record global private investment in space. However, 2022 and 2023 saw a significant decline due to Russia's invasion of Ukraine and broader macroeconomic challenges. The encouraging news is that the private investment community appears ready to re-engage with the sector."

"We now have a clearer understanding of what makes space companies successful, compared to the perhaps excessive optimism of four or five years ago," he reflects. "Not surprisingly, the fundamentals align with successful businesses in any sector: understanding customer needs and reasonable market projections. While the space community often views itself as exceptional, we're finding that space businesses must operate according to the same principles as many other industries."

What excites him most is the diversity of opportunities. “It’s always a trap when people ask me, ‘Which specific segments are you most excited about?’ I’m excited by the tremendous diversity in the space business. We can talk about space in terms of the traditional verticals—communications, navigation, weather, remote sensing— which themselves are being disrupted at lightning speed. 

“I can also move further out on the spectrum to space medicine, space logistics, and in-orbit servicing and manufacturing” he adds. “The phrase I’ve used in past congressional testimony is that the space economy is ‘accelerating and diversifying’.”

How do you envision the relationship between space agencies and commercial entities evolving over the next decade, particularly regarding resource rights and regulation?

“Just as a side note, in the space business historically, someone would bring you an innovation and say, ‘Hey, look at this cool idea I have,’ and you could say, ‘That’s great; come back in a decade,’” O’Connell explains. “The challenge now is that these innovations might be right on our doorstep—maybe two years away, maybe two months away. That makes planning between the government and industry much harder.

“I always say both government and private investment are very important,” he emphasizes. “If I want to do a very high-risk mission, the government is probably going to fund that, at least initially. When we reach some of the more mature markets, private finance is a different way of looking at things and helping them scale.”

He views private finance as an innovation accelerator: “If I go to an investor and say, ‘I want to build a company exactly like Angelica’s,’ the investor will say, ‘Why would I give you any money for that? I want you to do something different, something better.’ So both government funding and private funding are needed.”

On regulation, O’Connell brings decades of experience: “I’ve spent most of my career, in one way or another, pushing back against regulation based on wishful thinking, hope or fear. Regulation does have a place, but it has to be done very carefully, because it can stifle innovation. Government processes, including regulatory ones, always move more slowly than the market, especially in this sector. 

“In U.S. law, we regulate three functions,” he explains. “Communications through the FCC, launch through the FAA, and satellite imagery through NOAA. Historically, the government had decades of experience with these technologies when they were commercialized or privatized. That’s not the case today. We have so many new technologies coming into the market that the government doesn’t necessarily have a decades-long lead. It may have no lead at all. That makes regulation much more delicate, because you can risk wiping out innovation or, worse, driving companies abroad.

“To be effective, regulation must meet certain criteria. First, it has to be transparent, so a company knows exactly what it needs to do and what the government’s process is. Here’s a regulatory success story: in 2020 we rewrote the satellite remote sensing rules, removing a lot of the historical ‘tricks and traps’—retroactive conditions, pausing the review clock. Companies were required to get a license within 120 days, but what used to happen was that on day 119, at 5:00 p.m., they’d receive a letter saying, ‘We’re sorry, we can’t decide.’ ‘We’ll get back to you.’ We took all that out.

“Second, regulation has to be efficient. There should be a clear timeline—60 days, for instance—and then a decision must be made,” he continues. “Lastly, and probably the hardest part, regulation has to adapt to the market. That’s challenging for any policy issue because government processes are slower, more deliberate, and involve complex stakeholder inputs and trade-offs.” Space technologies are moving at a blistering pace. 

How do you assess the current balance between promoting commercial space innovation and protecting critical space infrastructure from emerging threats?

“I dislike the B (balance) word. For many years, people have talked about ‘balancing’ commercial and national security. I think that’s a false premise,” O’Connell says, firmly. “If I look at our defense capabilities, I’d say a strong, vibrant commercial space industry is absolutely essential for strong national security. It’s not either/or."

“I pointed out in my USGIF award dinner speech last December that I worry there’s a gap between rhetoric and reality. We say all these things about the promise of leveraging commercial space capabilities, but we haven’t yet fully executed on them. That often comes down to process and funding. How do we effectively utilize commercial capabilities? Well, we need to fund them, and we need a predictable, transparent acquisition process.”

He draws a sobering comparison to international competitors: “When I look at our adversaries—for instance, China—we used to think of them in the late ’90s as a relatively weak space competitor. Then they published a series of white papers on what they intended to do in space, and they systematically did almost everything they said they would.”

Regarding space infrastructure protection, O'Connell sees sustainability as a business imperative: "People used to say to me, 'You know, Kevin, industry doesn't give a damn about space sustainability.' But if you stop to think about that for a few seconds, it makes no sense. Sustainability and safety in space pave the way for future revenue, future profit, and future innovation.

He draws an illuminating parallel with cybersecurity: “I think we’re at a point with sustainability—and this includes safety—is similar to where we were with cybersecurity 10 or 15 years ago. Back then, CEOs would say, ‘I’m not going to spend a dime on cybersecurity. The government can fix that problem for me.’ But that wasn’t going to happen, and it didn’t happen. Over time, CEOs realized that cybersecurity investments are simply a cost of doing business.”

“I believe that’s exactly where we’re headed with space sustainability,” he continues. “With so much debris in space and so much adversarial behavior, CEOs will certainly use whatever government capabilities are available, but then they’ll start making their own investments to maintain safety and sustainability as part of the cost of doing business.”

Through Space Economy Rising, you advise on economic inputs like talent and private investment. What specific skills and capabilities will be most crucial for the space industry's growth?

“It’s a huge question—talent,” O’Connell stresses. “People tend to say, ‘We only need PhD engineers, rocket scientists, etc.’ And, of course, we need all the PhD engineers and rocket scientists we can get. But we also need a wide variety of other skill sets. The way I think of it is, we need the same kinds of talent in space that we need here on Earth—essentially 90% of the same skills.

He shares a revealing anecdote from his time at Commerce: “When I was at Commerce, we held a session on encouraging women and minorities to enter the space sector. We had the usual participants—all good folks—in a room. Then a woman walked in, very animated, and said, ‘I’m a chef.’ Everyone looked around, wondering if she was in the wrong place. She continued, ‘I understand food tastes terrible in space, and it’s going to be my job to make it taste better.’ That story illustrates my point perfectly: we’re going to need every skill set in space that we have on Earth.

"On Space Economy Rising's mission," O'Connell explains, “We started out doing much the same kind of work: engaging companies worldwide to help them with strategy, finance—especially in the United States—and regulation. Young companies often push regulation to the back of their minds. They focus on their technical program first, then the business side—they have salaries to pay—and then they realize, ‘Oh, that regulation stuff is tricky,’ and it can sink them if they’re not careful.”

He’s particularly passionate about global participation in the space economy: “In September, we published an op-ed in Space News with Kelly Kedis Ogborn of the Space Foundation called ‘How Countries Increase Their Participation in the Global Space Economy?’ That’s the question we get everywhere we go, from Angola to Japan.

“There are some tough lessons to learn. If a government doesn’t have a favorable business climate, it won’t enable the space industry any more than it would encourage other industries. Years ago, I met a very enthusiastic foreign minister who loved space and told me, ‘Kevin, we’re going to have a launch capability, a remote sensing capability, and a communications capability.’ I finally said, ‘With all due respect, Minister, no, you’re not—you can’t afford it.’

“Being excited isn’t enough,” he continues. “We tell this to government leaders worldwide, and we also tell it to leaders within U.S. states. Everyone is excited about the space economy, but excitement alone won’t cut it. You need to take a hard, objective look at your comparative advantage: What does your academic community or industry bring to the table? What’s the potential for partnership in your region?”

Given your experience at the intersection of policy and commerce, what critical reforms or policy changes do you believe are needed to unlock the next phase of space economy growth?

“Let me start with the government perspective,” O’Connell says. “One thing I always wanted at Commerce was a better approach to what futurists call ‘horizon scanning.’ While I was there—and I’m sure my successor dealt with this too—we literally saw hundreds of people come through with space economy ideas at various stages of maturity.

“You have to consider someone who walks in and says, ‘I’ve got a great idea, and I have $10,000 of my grandmother’s money’ versus 10 companies that each have a million dollars and are all focused on a similar market segment. My job at Commerce was never to say that something was a good idea or a bad idea, rather to point them to other government agencies and other contacts that might be helpful. Understanding what’s out there and the kind of financial backing they have can help the government anticipate market segment developments and how it might become a first adopter of a given capability.

“One critical topic is space mission authorization,” O’Connell explains. “We’ve been debating it in the U.S. over many prior Administrations. It basically seeks authorization for a wide range of ideas coming to market that the government doesn’t have extensive experience with, and to provide it in an efficient manner. Mission authorization is coming up again under this administration. It will likely start with the presumption of approval, and encourage rapid innovation. It will weigh the innovation potential against traditional safety and security contexts. If the government wants to deny a license, it will have to prove why that’s necessary. We’re going to encourage innovation.

“Another area that needs attention is space nuclear activities,” he continues. “Toward the end of the last administration, we managed to get out a Space Policy Directive on the use of space nuclear power for exploration and other purposes. Why is this important? If you look at the lunar economy and what it could become, the difference between a small, mostly government-run economy and a far larger one is nuclear power and propulsion in space. Of course, anything nuclear carries huge regulatory complexity. We’ll see progress, but it won’t be simple. There are a few other specialized areas like that, for example, space medicine and the links between space and blockchain technologies.

About Kevin O’Connell

Kevin M. O'Connell is a renowned expert in space commerce, global space economy, and U.S. national security with nearly four decades of experience. As the current CEO of Space Economy Rising, he provides strategic advisory services to space companies and stakeholders, while also serving as Chair of the Advisory Board for the Institute of Space Commerce. His distinguished career includes serving as Director of the Office of Space Commerce (2018-2021), where he advocated for the commercial space industry and advanced American leadership in space safety. O'Connell's extensive background spans roles in the Department of Defense, State Department, National Security Council, and private sector, including founding Innovative Analytics and Training, LLC. He has significantly contributed to space policy through his research, publications, and teaching positions at prestigious institutions like Georgetown University and the Thunderbird School of Global Management. His expertise in satellite remote sensing and space commerce has been recognized with the 2024 U.S. Geospatial Intelligence Foundation's Lundahl-Finney lifetime achievement award, and he continues to shape international space policy discussions through his work and as co-host of the Space Economy Insights podcast.