Regulatory Review: Galileo Takes Off–Sending Technology To New Heights
by Gerry Oberst
The Financial Times calls it “a white elephant preparing for take-off.” The Wall Street Journal calls it a “duplicative system that replaces one that already exists and is available to anyone in the world.” But a French politician says that without it, Europe would “become a vassal of the United States.” And in shrill language worthy of a London tabloid, certain European officials say that it will replace a “mediocre” American system that suffers from “a total absence of guarantee and responsibility.”
What on Earth could these sources be referring to in such heated and polarized language?
The subject of this controversy is Europe’s new Galileo radio navigation satellite project, finally approved by the European Council of Transport Ministers this past March. The Council, after much acrimony, agreed to release 450 million Euros (U.S.$400 million) in European Union funding to complement 100 million Euros (U.S.$89 million) already released and another 550 million Euros (U.S.$489 million) from the European Space Agency.
Galileo is to be a 30 in-orbit satellite constellation for positioning and radio-navigation services, with another eight spare satellites on the ground. The “mediocre” and “irresponsible” U.S. system is the GPS system that has been in operation, with upgrades, since 1989.
The European Commission officially proposed this new competitive system for the first time in February 1999, although the idea was kicking around in Brussels at least a year earlier. It has taken more than three years to get beyond that stage, because of suspicions that Galileo would indeed become a white elephant, providing duplicative services that the U.S. GPS satellites provide for no charge. The final funding stage was held up for more than 15 months, due to the reluctance of some European national governments to commit so much to the speculative venture.
But the Commission insists that Galileo will not be expensive and that the market is out there waiting. If the system can be developed and deployed on time, it should cost between 3.2 billion Euros and 3.4 billion Euros (U.S.$2.8 billion and $3 billion), according to a recent Commission fact sheet. The ink was not even dry on that estimate, however, before the Commission’s consultants tweaked the cost prediction up to 3.6 billion Euros (U.S.$3.2 billion), and nobody believes initial forecasts of such government programs anyway. (By comparison, a few years ago the United States estimated that the cost of the GPS program would be $14 billion in 1995 dollars, not counting launch costs.) But the Commission says that its Galileo estimate is the equivalent of 150 km of new highway, or a main rail tunnel or a variety of other big-ticket European transport projects already under way.
Once the system is up and flying, the annual cost of operating Galileo, including constellation replacement, is estimated to be 220 million Euros (U.S.$195 million) per year, 70 million Euros (U.S.$62 million) of which are operating and maintenance costs.
What does Europe get for this investment? First and foremost, a strategic independence from the U.S. system for a critical part of the future economy. European officials make the case that a wide range of future economic activities will come to depend on positioning services. Galileo is designed to give a technological edge, create substantial economic opportunities and offer a competitive alternative to the GPS system.
The Commission says that the macroeconomic benefits of the project could be tens of billions of Euros, and an equipment and services market of up to 10 billion Euros (U.S.$9 billion) per year by 2010. It also predicts that 100,000 new jobs could be created. Some Galileo services would be free, including a basic level for consumer applications (no doubt because the GPS service is also free), but some restricted access services for commercial and professional applications would require payment, which might offset some costs of the system.
Timing, however, will be everything. Already the United States is working toward a series of upgrades to the existing system, and has advanced the deployment date for a new generation of GPS 3 navigation satellites, which could take the lead on the Galileo system. Many of the loudest claims by European officials were based on comparing what Galileo is expected to be in 2008 with what the GPS system is today.
More critical for the timing, perhaps, is that the frequencies allocated internationally for Galileo must be brought into use by February 2006. Background papers for Galileo state that construction must start no later than 2004 to meet this ambitious target.
Galileo is competition to the GPS system, and it is American gospel, as the European Commission says, to support competition. Through Galileo, Europe gains a necessary degree of strategic independence. In any event, the two systems are expected to be interoperable–this was a position included in the critical March 2002 Council meeting that approved the big chunk of EU funding. Competitors do not have to engage in shrill diatribes, however, which can only create hard feelings. Get on with the program and get the satellites in the air, but cut out the posturing.
Gerry Oberst is a partner in the Brussels office of the Hogan & Hartson law firm. His email address is email@example.com.