European transport ministers signaled March 22 their readiness to rethink the strategy for funding, building and operating the Galileo satellite navigation system. It’s about time. The program’s continuing disarray betrays the serious doubts , both among participating European governments and within the industry consortium created to manage the constellation , in Galileo’s potential as a profit-making business.
Certainly there are other issues that have hampered negotiations over the 20-year Galileo operating contract between the commission and European Space Agency on one side and the industrial consortium on the other. These include often-competing national interests, cost overruns, changing technical specifications and disagreements among consortium members — and among members of a separate consortium that is to build the system — over such things as leadership and geographic distribution of the workload.
But as difficult as these issues are, the more fundamental problem is the notion that the company managing Galileo is supposed to contribute billions of euros to deploy, maintain and operate the 30-satellite constellation and recoup this massive investment through sales of Galileo services.
Signals from the U.S. GPS satellite navigation system are available worldwide for free, as are those from Russia’s Glonass system, which is being replenished. China, meanwhile, is planning its own global navigation constellation, while India and Japan intend to deploy regional systems. Given all this, it is hard to see the business case for Galileo.
Indeed, one of the sticking points in negotiations on the Galileo operating concession has been over the assumption of the business risk. The negotiations, which have been going on since late 2005, remain stalled even though the European Commission last year indicated that it was open to co-signing a 2.25 billion euro ($3 billion) loan that would help the consortium fund its share of the program.
The assumption of risk, of course, is not the only issue, but it is fair to assume that if the industry consortium truly felt confident in the profit-making potential of the enterprise, the negotiations would not have dragged out for this long.
Having just about had enough, the European transport ministers have now set deadlines for progress in the Galileo concession negotiations and ordered that alternative funding strategies be considered. Most significantly, the ministers have set a June 7 deadline for deciding whether the public-private financing scheme is viable, or whether another approach should be taken.
Let’s hope the ministers are serious about developing alternative approaches and not merely trying to force the consortium back to the negotiating table. No amount of good-faith bargaining can truly strengthen the shaky foundation upon which the current Galileo strategy is based. Meanwhile, the cost of the system continues to rise with each day the program remains stalled.
The idea that the private sector would provide most of Galileo’s financing was no doubt helpful in selling the program politically. But with European governments now sold on the strategic necessity of having an independent satellite navigation system, it might be best to bite the bullet and pursue a traditional government procurement approach.
This is not to say that a public-private partnership on Galileo is unworkable. In fact, it could well be maintained for Galileo operations once the public sector has paid for the basic infrastructure.