U.S. Air Force lieutenant general Steve Kwast speaks at the New Worlds 2017 conference in Austin, Texas. Michael Sheetz | CNBC

Air Force Lt. Gen. Steve Kwast believes a "Kitty Hawk" moment will begin a new era in space. But while the U.S. still leads every other country in space, Kwast cautions that the edge is whittling away. "In my best military judgment, China is on a 10-year journey to operationalize space. We're on a 50-year journey," Kwast told CNBC. Kwast, who is also the commander and president of Air University at Maxwell Air Force Base, said the United States must "bring together the right talent to accelerate the journey." He said this would push the space industry to a Wright Brothers-like moment. "We could be on a five-year journey because it's all about how aggressively we are going about this journey," Kwast said.

Regulations in the way

A half century of regulating satellites has made it nearly impossible for entrepreneurs to succeed, he said. The current regulatory environment is like needing to submit an itinerary for every item you plan to bring on a flight from D.C. to Los Angeles — one year before the flight, he said. "You have to detail everything in your suitcase — each item's material, manufacturer, weight and more — the government takes a year to go through it and then tells you what you can and can't take," Kwast said. "And, if you have to update your request, then you have to start all over." He continued, "When you finally get approval you have to spend your entire life savings for the airplane, which, when you land, you have to burn to the ground." Officials want to evolve regulatory methods but must placate taxpayers that discarded rockets will not begin falling on their homes. "You need technological innovations to reassure Congress that this is safe and effective, as the FAA cannot do this unilaterally," Kwast said. "Low-cost access to space is the first domino to making this possible." The Federal Aviation Administration told CNBC in September that it is working to make access to space more efficient. SpaceX has also criticized the regulatory process, with President Gwynne Shotwell noting the process takes six months "and then you reapply at 90 days, 30 days, and then 15 days to file a flight plan." "If we want to achieve rapid progress in space, the U.S. government must remove bureaucratic practices that run counter to innovation and speed," Shotwell said.

National security and global prosperity at stake

Militaries will soon work more extensively in the space between the Earth and moon, according to Kwast. That realm is the next high ground, where nations are straining to gain a strategic advantage. "China is working on building a 'navy in space'" that would work even beyond Earth's gravity, Kwast said. Yet China is the not the most pressing threat. North Korea, with its continued missile testing, is "a real problem," Kwast said. "Right now, if North Korea were to launch a missile into space and detonate an electromagnetic pulse, it would take out our eyes in space," Kwast said. The Cold War-era "Star Wars" concept was "very strategic," Kwast said, but the technology was not feasible. The more the U.S. innovates in space, the lower the potential threat from a missile. Even though the space industry is poised to become eight times as valuable over the next 30 years, Kwast believes it's too early to think about a new military force in space. "We could have an operational space force in three to five years," Kwast said. "However, that would be jumping to answering what the form looks like, before you know the function." In a January study called "Fast Space," Kwast wrote a list of recommendations to the Air Force's U.S. Space Command. He details that public-private partnerships must be the nation's focus, not an "an Air Force in space." "It took from the Wright Brothers in 1903 to 1945 — two World Wars — to get flying to where we needed an Air Force."

Finding balance in public-private partnerships

Kwast is a staunch supporter of corporations partnering with government. But he warns against the military completely depending on the private sector, giving the example of how the Air Force contracts launches to SpaceX and United Launch Alliance. "I think the balance between public and private is reasonable right now, but we're still not doing enough, and we're not aggressive enough," Kwast said. At the New Worlds conference in Austin, Texas on Friday, Bill Gerstenmaier, the NASA associate administrator for Human Exploration and Operations, said his agency shares a similar vision. He does not expect "to get another huge budget like the Apollo missions," and says NASA will focus on "orchestrating human spaceflight," instead of conceptualizing, funding, building and operating all on its own. Gerstenmaier told CNBC that he sees NASA now operating more akin to a venture capital firm, picking investments and helping to build them up. He cited Morgan Stanley's recent report on the industry as a look into the direction space is heading. Kwast applauds the high-risk, high-reward entrepreneurial spirit of modern space companies. He calls himself "a very strong advocate" for partnerships "based on economic realities" that create competition. "Corporations have a vicious, clear-eyed view of the bottom line, which is a very healthy thing," Kwast said, before adding: "Companies that fail should fail."

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