The Role of Regulatory Frameworks in Balancing Between National Security and Competition in LEO Satellite Market

The low Earth orbit (LEO) satellite market is booming, and the expectations
for an efficient regulatory system are rising. Governments seek to keep regulatory improvements at the same pace as innovations. However, their divergent priorities and interests result in different frameworks and relatively costly solutions. Moreover, LEO satellites are operated in space, where states’ security interests exist. This clash of interests substantially influences the concepts of national security and competition. Consequently, a regulatory framework shifts from a simple licensing system to a gatekeeper to entail that just competition cannot drive the market without considering national security concerns. In this respect, entities and customers are exposed to various incentives and transaction costs, prompting them to alter their strategies and contractual arrangements. In some cases, these choices operate like barriers to entry which in turn might distort market competitiveness. This paper considers the regulatory frameworks in Australia, Bangladesh, Indonesia, Japan, and Vietnam to explore the shape of a robust regulatory framework. Given that the United States is a pioneer in the expanding notion of national security and the LEO satellite market, the Federal Communications Commission’s recent changes are also examined. This paper employs transaction costs and rent-seeking approaches to identify root causes of possible anticompetitive behaviors and proposes viable solutions to advance a robust regulatory framework consistent with LEO satellite internet.