Dollars and Sense: What EU Enlargement Means To The Space Sector

By Owen D. Kurtin

With its changing landscape, The enlargement of the European Union (EU) will have direct implications on future space business conducted both regionally within Europe as well as globally within the commercial and military satellite sectors. On May 1, 2004, the EU grew from 15 to 25 member states. This joining in a common market of the Western European nations that provide a significant percentage of global operating, manufacturing and launching capacity with new and underserved Eastern European customers is likely to have profound and exciting implications for the space industry and lead to many of the types of joint ventures we discussed in previous columns.

First, the EU enlargement provides a new dimension to the potential customer base for satellite service. The 10 new EU entrants (Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia) are in general less developed, more rural and of lower population density than the pre-existing 15 Western European member states. This is as true–or more so–for the four other countries (Bulgaria, Croatia, Romania and Turkey) that are candidates for upcoming EU membership.

The new member countries have satellite service penetration rates far below their Western European and North American counterparts. Terrestrial competition is also much less robust and often unavailable, creating an enormous opportunity for FSS, DBS and DARS services. Broadband and Internet service have even lower penetration rates in the new and would-be EU member countries than do video and radio service. The European enlargement may thus finally create the business case for broadband satellite service that the 1990s ventures in the sector failed to provide. Telesat Canada’s Anik F2, launched by Arianespace this past July, will provide an interesting comparative test case for the new Europe to follow. This satellite will provide Ka-band broadband and Internet service to some of the most remote reaches of North America. If it successfully commercializes the Ka-band service on a continent-wide basis in North America, it will help make the case for a possible equivalent European service.

Aside from the potential extension of established and emerging services to the new EU members, the most exciting development on the European horizon is the Galileo satellite navigation and localization project. Galileo, a 30-satellite constellation intended both to complement and compete with the U.S. Global Positioning System (GPS), offers the potential for civil and military precision tracking of persons and vehicles with unprecedented accuracy. The ramifications for air, surface and marine navigation and travel; fisheries and agriculture; natural resource location and exploitation (and exploitation in environmentally efficient and protective ways) have the potential to speed the transformation of the Eastern European economies and their integration with their Western European counterparts.

There is, however, a third aspect of satellite service integration in the EU enlargement landscape, with less immediate impact on markets and services for new customers, but with a more profound political impact on EU development. The EU enlargement has provoked controversy among the pre-existing member states, in part because the new entrants are likely, for the foreseeable future, to be net beneficiaries of, rather than contributors to, EU subsidies. Even more controversial is the fact that EU enlargement continues to redefine and diffuse what it means to be a European. The original six founding members of the EU (Belgium, France, Italy, Luxembourg, the Netherlands and West Germany), despite centuries of competition and war in their past, shared in the post-war world a broad social, political, religious and cultural consensus. This shared character is not as common to the new member states, which had very different post-war experiences. The newest member states are generally more economically liberal, with less developed social welfare programs and correspondingly lower taxation. Legal and commercial norms are also less developed in the new members. Moreover, the possible EU accession of Turkey, a Muslim country of nearly 68 million people, straddling both Europe and Asia, poses a cultural, religious and geographic challenge to the EU’s makeup. In addition, the extension of the EU border to Russia poses analogous opportunities and challenges for development and integration.

The challenge of participating in the integration of a Europe larger and more diverse than ever in its history is one that the space sector is uniquely able to meet. The opportunity for satellite service to bring together and aid in the development of not only vast new regions of Europe but ones that will be, as never before, culturally, politically, religiously and politically disparate, is one of the most exciting potentials the space sector could hope to have and one in which it will play with less competition from terrestrial service than it has ever known.

Michael Flynn co-wrote this article. Kurtin and Flynn are partners in the New York office of law firm Sonnenschein Nath and Rosenthal LLP. They may be reached at 212/768-6700 or by e-mail at [email protected] and [email protected], respectively.