E
urope’s Galileo navigation program
has come to a halt. The dream of those who saw Galileo as a private undertaking with minimum underpinning from governments has vanished. The eight partners of the consortium that was supposed to carry this project to completion have thrown in the towel.
The prospects of a commercial return are too uncertain to warrant taking the financial risks implied
by the huge capital investment required
to deploy
the 30-satellite network.
In a letter
that appeared in Space News in August 2003
, one of us
wrote: “The current assumption is that the private sector will contribute the remaining $2 billion
. This is daydreaming. …
Given the endemic allergy of the European private sector to such kind of risky enterprise, it is clear that this program
will never reach maturity.”
This was merely
reading the writing on the wall
then. But it took the European Commission four years to admit it – four years during which nothing concrete has been achieved except ton
s of papers and reports and a small experimental satellite that was launched mainly to occupy the frequency spectrum assigned to the system.
Where do we go from here? To address that question the
commission has studied six possible alternative scenarios ranging from one extreme to another:
continue the present scheme (Scenario 1),
or stop Galileo (Scenario 6).
From the intermediate scenarios,
Scenario 4 emerges as the most attractive
. That scenario assumes
the deployment phase still to be initiated would be entirely public funded, while the subsequent operational phase would be the subject of a public-private partnership (PPP). The
commission recommends selecting this
scenario because it would lead to the earliest start date for the operational phase –
2012 –
and to the lowest overall cost. It also recommends that the European Space Agency (ESA) be retained as the procurement agent and design authority on behalf of the European Union, acting under the latter’s authority and rules. The recommendation remains to be endorsed by the EU Council.
However, the most likely scenario is arguably none of the six considered so far. There are other possible scenarios that the
commission seems to have overlooked.
The point of departure should be that program
s involving new technologies and aimed at providing new services in a competitive commercial world must be conducted with the greatest possible speed. Failing that, they run the risk of being overtaken by competitors before they reach the market.
Projects have accordingly failed when their promoters took their time and chose to ignore the threat of competition. A prime example of this was the Iridium satellite system designed by Motorola to provide mobile communications
around the world. Before it sold its
first telephone call, the market had been confiscated by the terrestrial GSM network, which had spread at surprising speed. Billions of dollars went down the drain.
Galileo’s competitors
already are well on their way;
the first one
of course is the
U.S. GPS. New satellites with improved capabilities are continually
added to the GPS
constellation, and the contract for the development of the third generation,
GPS 3,
will be awarded before the end of the year. That system will feature intersatellite links so that it will be one step ahead of Galileo
. GPS will continue to be free for anybody to use as it is today.
The Russians also are actively busy adding new satellites to their Glonass navigation system to increase its coverage and raise the quality of the service. The system should be fully deployed with 24 satellites by 2009. In a recent decree, Russian President Vladimir Putin ordered that Glonass
be made available to all users free of charge.
China plans to have its own Beidou navigation system ready for domestic service in 2008, and eventually to expand it for global coverage. Four satellites
already have been launched. Japan and India
also have announced plans to deploy their own systems.
In addition, who knows whether or not
an alternative terrestrial system based on the ubiquitous GSM network
suddenly will appear in the meantime? Various techniques can be devised to adapt this most ubiquitous and versatile of network technologies to positioning requirements and applications provision.
Even assuming that Scenario 4, which calls for
public funding of all activities until the start of operations
and PPP afterwards,
is approved and implemented forthwith – which is by no means certain – the projected date of 2012 for the beginning of the operational phase seems significantly optimistic. In a program
of this magnitude and complexity, delays are practically inevitable.
Experience tells us that most ESA managed program
s have been affected by considerable delays. If things proceed under Scenario 4, factoring in a potentially delay to 2014 or 2015, the probability is high that most of the market will have been captured by other systems by the time all 30 satellites are in orbit and the ground infrastructure is in place
.
Galileo could then face the same fate as Iridium.
If that happens the
commission will find itself in the same situation as today:
The prospects of an economic return will look so thin that no commercial enterprise will be prepared to enter into a PPP.
That will be the time to envisage two other scenarios:
Scenario 7 will be to stop Galileo in seven or eight years’ time, and Scenario 8 will be to inject more public money to keep the system running indefinitely but with scant offsetting commercial revenue.
Reliance on the private sector has become an obsession in the European Union, which seems to have a learning difficulty when it comes to doing this kind of project. Sometimes it can be appropriate if done well –
the Eurotunnel is not encouraging in this regard; British Sky Broadcasting, or BskyB, is
. But merely hoping for privati
zation to work under very uncertain future conditions can be to deny a worthwhile project’s ultimate viability.
How
then
could a privatiz
ed
Galileo hope to compete with the several systems financed by government funds or beat a GSM-based solution to market? It is only Scenario 8 that offers a clear long-term financial and practical basis. The European Commission attaches great importance to the strategic value of Galileo for Europe;
but assuring the strategic value of the system is not self-evidently a burden the private sector should be expected to shoulder in the first place.
However,
what could
be privatiz
ed
, through franchises in particular, are well-defined, sustainable commercial applications. This is what business ordinarily does well.
But speed is of the essence, and assuring the commercial viability of those applications
also will depend on creating a structure under which ESA itself is constrained to respond to market needs for the availability of the system on time and for appropriate design of its interfaces
. That will demand that ESA revolutioniz
es its mode of operation and obtains the assured availability of more human and financial resources
than under a “business as usual” approach for an ESA program
.
So the
commission had better start considering Scenario 8 without further ado. The time to cease indulgence in daydreams is now, or we may never get to see Galileo at work.
Author’s Note: Since this article was written, the authors have learned
that the EU Transport Ministers considered the scenarios for
Galileo
at their
June 8 meeting but postponed any decision on financing the program until later this year.
We leave it to the readers to draw their own conclusion.
Pierre Bartholome and Kevin Madders are partners in Systemics Network International, a Belgium-based independent telecommunications and space consultancy.
