Executive Summary
The low Earth orbit (LEO) satellite internet sector has undergone a transformative expansion since 2020. SpaceX's Starlink constellation alone now comprises over 6,400 operational satellites as of early 2026, with filings for up to 42,000. OneWeb, Amazon's Project Kuiper, and China's Guowang constellation collectively plan to deploy an additional 25,000–30,000 satellites by 2030. The total number of active satellites in orbit has surged from approximately 3,400 in 2020 to over 12,800 in 2026 — a fourfold increase in six years.
This paper analyses the space economy's governance challenges through the lens of commons economics and game theory. We identify three interconnected market failures: orbital congestion as a tragedy of the commons, spectrum allocation as a contested auction problem, and the connectivity divide as a club goods provision failure. The International Telecommunication Union (ITU), the primary governance body for orbital and spectrum resources, faces institutional design challenges that its 1960s-era framework was never intended to address. We propose mechanism design reforms that could align private incentives with the sustainable and equitable use of orbital commons.
The Orbital Commons: From Scarcity to Congestion
Garrett Hardin's tragedy of the commons provides a foundational framework for understanding LEO congestion. Orbital slots and the electromagnetic spectrum are rivalrous but non-excludable resources — classic common-pool resources whose overexploitation produces negative externalities borne by all users. The European Space Agency (ESA) estimates that over 36,500 objects larger than 10 centimetres currently orbit Earth, with approximately 130 million smaller debris fragments. Each collision generates additional debris in a cascading process known as the Kessler syndrome, potentially rendering entire orbital bands unusable.
The economic logic driving overexploitation is straightforward. Each satellite operator captures the full private benefit of deploying an additional satellite — enhanced coverage, increased revenue, competitive positioning — while bearing only a fraction of the congestion and collision risk costs, which are distributed across all orbital users. This divergence between private and social costs is the textbook definition of a negative externality. The OECD's Space Economy at a Glance 2025 estimates that the annual expected cost of debris-related collision avoidance manoeuvres now exceeds $180 million across the commercial satellite industry, a figure projected to reach $1.2 billion by 2030 under current deployment trajectories.
Elinor Ostrom's work on commons governance offers more nuanced insights than Hardin's binary privatise-or-regulate prescription. Ostrom identified eight design principles for successful commons management, including clearly defined boundaries, proportional equivalence between benefits and costs, collective-choice arrangements, and graduated sanctions. Applied to orbital governance, these principles suggest that effective management requires not merely top-down regulation but participatory governance mechanisms that involve satellite operators in rule-setting — precisely the model that the ITU's current framework fails to provide.
Spectrum Allocation: An Auction Design Problem
Radio frequency spectrum is the lifeblood of satellite communications, and its allocation represents one of the most consequential auction design problems in contemporary governance. The ITU's current allocation mechanism — first-come, first-served filing with coordination obligations — was designed for an era of geostationary satellites operated by national telecommunications monopolies. It is ill-suited to the mega-constellation era.
The filing system creates perverse incentives. Operators file for vastly more spectrum and orbital capacity than they intend to use, creating "paper satellites" that block competitors without deploying actual infrastructure. The ITU received over 1.3 million satellite frequency filing notifications between 2017 and 2024 — orders of magnitude more than the number of satellites actually deployed. This spectrum squatting behaviour is a rational individual strategy that produces collectively inefficient allocation.
Auction theory, pioneered by William Vickrey and subsequently developed by Paul Milgrom and Robert Wilson (2020 Nobel laureates), provides well-established mechanisms for efficient spectrum allocation. Combinatorial clock auctions, used successfully for terrestrial spectrum allocation in dozens of countries, could be adapted for orbital spectrum. Such auctions would replace the current filing system with a mechanism that reveals operators' true valuations, allocates spectrum to highest-value uses, and generates revenue that could fund orbital sustainability measures and connectivity programmes for underserved regions.
However, the international dimension complicates auction implementation. Terrestrial spectrum auctions are conducted by national regulators within their sovereign territory. Orbital spectrum, by contrast, is an inherently international resource governed by the ITU's Radio Regulations. Implementing auction mechanisms would require either ITU institutional reform or a plurilateral agreement among major space-faring nations — both politically challenging but increasingly necessary.
The Connectivity Divide: Satellite Internet as a Club Good
Satellite internet's promise to bridge the global connectivity divide — an estimated 2.6 billion people remain offline according to the ITU's 2025 data — is frequently invoked as justification for permissive orbital governance. However, the economics of LEO satellite internet reveal a club goods dynamic that may actually exacerbate rather than alleviate digital inequality.
James Buchanan's club goods theory describes goods that are excludable but non-rivalrous up to a congestion point. Satellite internet fits this characterisation: service is excludable through subscription pricing and terminal hardware requirements, but non-rivalrous among subscribers until bandwidth capacity constraints bind. The critical question is the pricing and distribution of club membership.
Current pricing structures suggest that satellite internet is primarily serving affluent consumers in developed markets rather than bridging the connectivity divide. Starlink's standard residential service costs approximately $120 per month in the United States, with hardware costs of $599. In sub-Saharan Africa, where average monthly income is approximately $160, these prices place satellite internet beyond the reach of the populations most in need of connectivity. While Starlink has introduced lower-cost tiers in some developing markets, the price differential remains substantial.
The World Bank's 2025 Digital Development Report documents that 78% of Starlink's subscriber base resides in OECD countries, with rural and semi-rural areas in North America and Europe representing the largest market segments. The connectivity divide persists not because of technological limitations but because of market structures that direct satellite capacity toward high-willingness-to-pay consumers.
Game-Theoretic Model of Constellation Deployment Competition
The competitive dynamics among mega-constellation operators exhibit characteristics of a pre-emption game with first-mover advantages. In orbital mechanics, deploying satellites first confers lasting advantages: established constellations have priority in conjunction management, benefit from accumulated orbital data, and create switching costs for customers who adopt their terminal hardware.
We model this as a two-stage game. In Stage 1, operators simultaneously choose deployment scale (number of satellites). In Stage 2, operators compete in service markets given the capacity established in Stage 1. The subgame perfect equilibrium of this game exhibits overinvestment relative to the social optimum — each operator deploys more satellites than jointly optimal because deployment serves both a productive function (enabling service delivery) and a strategic function (pre-empting competitors and securing orbital and spectral resources).
This overinvestment equilibrium is empirically observable. Combined filings from the five largest constellation operators exceed 100,000 satellites — far more than technically necessary to provide global broadband coverage, which engineering estimates suggest could be achieved with 5,000–8,000 well-coordinated satellites. The excess represents the strategic component of deployment: capacity deployed not to serve customers but to claim orbital and spectral resources.
Toward Sustainable Orbital Governance: Mechanism Design Proposals
Addressing the triple market failure of orbital congestion, spectrum misallocation, and connectivity exclusion requires coordinated institutional reform. We propose three complementary mechanisms:
1. Orbital Use Charges. Analogous to congestion pricing in urban transport, orbital use charges would internalise the negative externalities of satellite deployment. Each operator would pay an annual fee per satellite calibrated to the orbital band's congestion level and debris risk. Revenue would fund active debris removal and orbital sustainability monitoring. The charge structure would create incentives for operators to deploy the minimum number of satellites necessary to achieve their service objectives, correcting the overinvestment equilibrium identified in our game-theoretic model.
2. Combinatorial Spectrum Auctions with Universal Service Obligations. Replacing the ITU's filing system with periodic combinatorial auctions would improve allocative efficiency. Crucially, auction design should incorporate universal service obligations: winning bidders would commit to providing a defined minimum level of affordable connectivity in underserved regions as a condition of their spectrum licence. This bundling of commercial and public-interest objectives mirrors successful models in terrestrial telecommunications regulation.
3. Multilateral Orbital Sustainability Treaty. Drawing on the Montreal Protocol's successful governance of atmospheric commons, a multilateral treaty could establish binding commitments on orbital sustainability: satellite deorbiting timelines, collision avoidance standards, and debris mitigation requirements. The treaty could incorporate the graduated sanctions mechanism recommended by Ostrom's commons governance principles, with non-compliance triggering progressively stricter consequences.
Implications for GDEF's Technology & Transformation Working Group
The space economy's governance challenges exemplify the broader theme of GDEF's mandate: the need for institutional frameworks that keep pace with technological transformation. The orbital commons is being reshaped by private actors at a pace that far exceeds the ITU's institutional adaptation capacity. Without proactive governance reform, the result will be an orbital environment that is congested, inequitably allocated, and potentially physically degraded.
GDEF's Technology & Transformation Working Group's initiative on Space and Connectivity Governance will advance the mechanism design proposals outlined in this report, engaging with the ITU, national space agencies, and commercial operators to develop implementable reforms for consideration at the 2026 World Radiocommunication Conference.
References & Sources
- ITU, Measuring Digital Development: Facts and Figures 2025. International Telecommunication Union. itu.int/statistics
- OECD, Space Economy at a Glance 2025. OECD Publishing. oecd.org/sti/space-economy
- Euroconsult, Space Economy Report 2025. euroconsult-ec.com/reports
- ESA, Space Debris by the Numbers. European Space Agency Space Debris Office. esa.int/space-debris
- Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press. doi.org/10.1017/CBO9780511807763
- Milgrom, P. (2004). Putting Auction Theory to Work. Cambridge University Press. doi.org/10.1017/CBO9780511813825
- Hardin, G. (1968). "The Tragedy of the Commons." Science, 162(3859), 1243–1248. doi.org/10.1126/science.162.3859.1243
- World Bank, Digital Development Report 2025. worldbank.org/digital-development
- Buchanan, J.M. (1965). "An Economic Theory of Clubs." Economica, 32(125), 1–14. doi.org/10.2307/2552442
- Union of Concerned Scientists, UCS Satellite Database, 2025 Update. ucsusa.org/satellite-database