The intense broadband electrostatic turbulence detected in the near vicinity of the shuttle during the OSS 1 and Spacelab 2 missions is interpreted in terms of the excitation of the beam-arc plasma instability. This new instability is driven by the free energy involving the interaction of the beam-arc (asymmetric ring) distribution function of the pickup water ions with the background ionospheric plasma. The results of a linear analysis show that the beam-arc plasma instability has unique characteristics that can explain most details of the wave spectrum detected with the Plasma Diagnostic Package (PDP) within 10 m of the shuttle. However, an analysis on the effects of varying beam-arc parameters as the angular dependence and thermal spread shows that the spectrum peak near the lower hybrid frequency (&OHgr;LH) is likely to be a result of nonlinear effects. This is because the heating of beam-arc ions expected in the nonlinear regime should lead to a resonant type instability which according to linear theory does not involve significant growth near &OHgr;LH. The linear beam-arc plasma instability theory can also explain the enhancements of the low-frequency component of the spectrum observed during water dumps. These enhancements are interpreted in terms of beam-arc plasma waves propagating in directions which are consistent with the highly inhomogeneous characteristics of the water dump regions. ¿ American Geophysical Union 1992