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Inside
the Community
EC, ESA Near Decision on
Galileo; Industry Makes Strong Pitch
Coming up on the December 212 European Union (EU)
Council of Transport Ministers meeting that is scheduled to decide its
fate, the proposed Galileo satellite navigation system is gaining both
technical definition and industry support. Although considerable uncertainty,
even anxiety, has arisen over the outcome of the transport ministers'
meeting, most observers in Europe anticipate that the decision will prove
fundamentally affirmative to move Galileo into its development and validation
phase.
At a November 6 plenary session of the Seventh World
Congress on Intelligent Transportation Systems (ITS), in Turin, Italy,
European Transport and Energy Commissioner Loyola de Palacio indicated
that the European Commission (EC) wants the transport ministers to make
as clear and definite a decision as possible. "We cannot continue postponing
a decision [on Galileo]. Some countries, including Italy, fully support
the Galileo proposal. Some countries continue to ask questions about the
costs and benefits," she said.
The European Commission (EC) and European Space Agency
(ESA) have invested more than E80 million in "definition phase" studies
during 2000, and probably an equal amount since investigation of a European
contribution to the Global Navigation Satellite System (GNSS) was formally
launched in 1994. More than 100 European companies took part in the studies.
What remains to be seen are the qualifications or directions
for further study with which the Council of Ministers might accompany
their decision to proceed with Galileo. These are expected to revolve
around the issues of the Public-Private Partnership (PPP) that has been
proposed for the system, the costs "and who pays them," along with associated
benefits, management of the program going forward, and the date when the
system will become operational.
Configuration and Cost
Based on definition-phase studies now being compiled
and reconciled into a report that will go to the ministers this month,
Galileo will have a 30-satellite middle Earth orbit (MEO) constellation.
Nine active spacecraft and one on-orbit spare will operate at 23,200 kilometres
in three orbital planes inclined at 56 degrees. Current estimates place
the cost of putting the ground and space infrastructure in place as £3.2
billion through 2008, when Galileo would be fully operational.
Responding to industry exhortations to bring the program
within a five-year planning horizon, the current schedule calls for an
initial operational capability with a completed constellation available
during 2006 2007 following a design, deve-lopment, and in-orbit
validation phase beginning next year.
In an October 2 speech to the transport ministers, de
Palacio said definition-phase studies estimated that cumulative VAT (value-added
or sales tax) revenue from Galileo pro-ducts and services would reach
£10 billion by 2020 based on sales of £100 billion, split roughly
evenly between the two categories. Cumulative system operator revenue
was estimated at £500 million.
Private Sector Role
In discussion at last week's Royal Institute of Navigation
NAV 2000 conference in London and subsequent interviews with major industrial
participants in Galileo, the leading private sector concerns include transferring
leadership for the system development to private managers as soon as possible
and adding substantial funding for market development that would parallel
the technical development work.
More specifically, the latter activity would be built
around substantial demonstration projects that "would make the markets
aware of what Galileo can do," in the words of Lyn Dutton, Racal Avionics
GNSS business development manager.
Public sector concerns focus on financial investments,
program risks, benefits, and institutional issues, such as the working
relationship between the EC and ESA, the evolving program management,
and negotiating GPS interoperability issues.
A key set of questions that will undoubtedly be raised
by the transport ministers is whether the EC and ESA will be able to leverage
private investment into Galileo, how much, in what form, and when. These
distinct agendas still need to find some common ground in the Galileo
process.
In her Turin talk, de Palacio said the EC anticipates
the use of public (EC and ESA) funds in the early preoperational phases
of the project for construction of the ground and space infrastructure.
However, she added that public funds would continue in later phases to
support delivery of Galileo services. She said plans now call for the
system to be operational by the end of 2006.
"Some system development costs should be borne by the
private sector," de Palacio said. "There should be a public and private
cooperation on costs and contributions." Reduction of transport costs
and increased efficiencies would "allow the recovery of the cost of the
initial investment in the middle term.".
De Palacio said that other European PPP efforts, such
as the Channel Tunnel and the Airbus Industrie partnership, inspired the
development strategy for Galileo.
"Government ministers are puzzled about many of the private
sector concerns," Tom Barrett, a director of the European Investment Bank
(EIB), told a NAV 2000 conference. "The issues raised have not crystallised
yet in the Galileo decisions."
Barrett said that, although "little confidence" can be
placed yet in the EC projections of Galileo-related sales, operator fees,
and tax receipts, "the driving point is the notion that the ultimate market
is so big that you have to take action now. We have to get in a more disciplined
discussion of financing. The technical and intergovernmental elements
have been sorted out pretty well. The time for answering the financial
question is now."
Private Finance Initiative
A NAV 2000 session chaired by Barrett brought the public
discussion of PPP finance and management to a new level. James Stewart,
chief executive-designate of Partnerships UK, who has participated in
many Private Finance Initiative (PFI) versions of PPPs, says the number
of such deals have grown rapidly during the last six years,with more than
250 PFIs closed in the United Kingdom alone for a combined capital value
of more than £13 billion.
Tom Schofield, also an EIB director, characterised PPPs
as an attempt to get private sector skills, expertise, and methods into
a project in order to increase efficiency and complement scarce public
funding. "There needs to be common incentives," Schofield said. "Everyone
needs to share if the project succeeds. If it's not a success, no one
should get rich at the others' expense."
Stewart, Schofield, and Barrett all identified good management
as the key to PPP success, and they urged early action to move the project
promoter role from the EC and ESA toward a private prime contractor. "A
decision in principle to build Galileo without addressing the nature of
management structure is not a very substantial decision," said Barrett.
In an interview with Galileo's World, Alain Bories,
corporate vice-president for space programs and the leader of Thomson-CSF's
companywide Galileo business initiative, said, "Galileo will only be successful
if applications, products, and services are ready when the GalileoSats
are in the sky."
"As a downstream industry, Thomson is reluctant to take
on risks before the end of the test and validation phase," Bories said.
"But industry can help fund deployment costs under a PFI scheme -- depending
on the business plans and concession terms."
With those elements in place, Thomson "is willing to
put large amounts of money -- hundreds of millions of euros" into Galileo-related
research and development during the last three years before the infrastructure
is fully operational.
British Industry Support
At NAV 2000, Anthony Parish, director general of the
UK Federation of Electronic Industries, gave a strong endorsement of Galileo
and urged his government's support at the upcoming council of ministers
meeting.
"Following careful consideration of the present situation,
including estimates of costs, markets, and revenues given in the various
reviews, we consider the project is progressing satisfactorily and that
its objectives can be achieved," Parish said, underscoring several other
points raised by the private sector. "Galileo is a business enterprise,
not an R&D program. Market development is more complex and difficult
to manage than the technical project."
In direct encouragement to a British government that
has held out for an early commitment of private funds, Parish added, "Infrastructure
must be funded in large measure by government. Private investment in systems
and services will exceed the infrastructure costs many times over. The
UK will have to contribute its share of the EU funding if Galileo goes
ahead. If the UK Government does not play its full part, the UK will gain
very limited benefits and still have to contribute substantially to the
development costs of the system."
U.S. Proposal May Fall Short
A U.S. proposal sent to the European Union (EU) in October
appears unlikely to advance an agreement covering the two navigation satellite
systems that could effect the Council of Transport Ministers decision
on Galileo.
"We've had a tough time initiating discussions that go
into technical issues," such as frequency selection, standards, and signal
design, says Eero Ailio, with the EC's Galileo International Relations
group. Ailio says the draft has been sent out for review and comment by
European Commission (EC) and member-state officials.
"I don't give up on these discussions, but to get to
some agreement by next month appears unlikely," he told the NAV 2000 conference
November 1 in London.
The agreement, which focuses on how GPS and the proposed
Galileo satellite system would coexist, emphasises the same themes that
the U.S. administration has been pressing from the beginning: interoperability,
open markets and free access.
The U.S. draft calls on both sides to agree not to mandate
the use of one system over the other while according national treatment
to the other's system. The agreement also seeks "disciplines on market
access."
This phrase, explained an expert familiar with the negotiations,
means that trade disputes would be resolved through the existing arrangements
and organisations such as the World Trade Organisation. The United States
and the EU would also agree not to use standards and certifications to
limit trade.
Jeffrey Bialos, the head of the U.S. delegation to the
GPS/Galileo consultations, says the United States is also seeking open
signal structures, which would enable any manufacturer to get the information
necessary to be able to build both Galileo and GPS receivers.
The United States also wants Galileo's technical parameters
set in such a way that the European system would not interfere with the
growth of the GPS system and would pledge as a signatory to the agreement
not to interfere with Galileo growth.
Bialos said that the U.S. would seek agreement on the
spectrum that Galileo would use so as to ensure interoperability and compatibility.
The EU had asked earlier in the year to share GPS frequencies and sought
permission to overlay Galileo signals on both the GPS L1 and L2 signal.
The United States has also suggested that an overlay might be possible
on the L5 signal. Though he declined to discuss the status of the negotiations
Bialos said "overlays are an issue that will be addressed between us in
this agreement."
The EU had requested that the two sides set up working
groups to hammer out details on overlays and signal structure as well
as other technical matters. The United States continues to maintain that
it will not participate in working groups until an agreement is reached.
No timetable has been set yet for further negotiations on the agreement.
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