PARIS — The European Commission, after months of tiptoeing around the issue, has informed its 27 member governments that the Galileo satellite navigation system will not reach full service until 2020 at the earliest and will be much more costly to field than previously disclosed.

Once deployed, the Galileo network will be unable to generate more than a token amount of revenue and will be more expensive to operate than forecast, even without considering the cost of replacing aging satellites with new ones, the commission said in a report sent to its member governments and to the European Parliament.

Published Jan. 18, the “Mid-term review of the European satellite radio navigation programmes” is the commission’s way of biting the bullet. In largely unvarnished language, it tells European Union (EU) governments that building and operating a 30-satellite positioning, navigation and timing constellation will be subject to costs these governments never considered when Galileo was first proposed and accepted as a European Union program.

For governments that had hoped Galileo might somehow remain within the current budget — 3.4 billion euros ($4.5 billion) between 2007 and 2013, the planned date of full operational service — the news is not good.

The commission now expects that Galileo, and its complementary overlay satellite service, called Egnos, will cost an additional 1.5 billion euros to complete, plus 400 million euros in a proposed contingency fund to protect against future unforeseen charges, for the period between 2014 and 2019.


Satellite Executive Felled by WikiLeaks Diplomatic Cable Disclosure 

European Ministers Voice Support for Galileo, GMES 

Galileo May Need ‘Too Big to Fail’ Label To Overcome Financial Hurdles

The commission sees no realistic possibility that fresh Galileo funding will be available before the next seven-year budget cycle, which begins in 2014, meaning Galileo will remain an 18-satellite system at least until 2020. Fielding just 18 satellites instead of the planned 30 will stunt Galileo’s growth in worldwide markets and limit its service offering, the commission says.

In addition to this, the commission estimates that operating the system will cost 800 million euros per year, including 110 million euros annually for the Egnos service, which features two terminals being built as piggyback payloads on commercial telecommunications satellites, plus a ground network.

These costs do not include any investment in a second-generation Galileo system.

Galileo is intended to be equivalent to the U.S. GPS navigation system, but funded and operated by civilian, not military, authorities. Galileo features a commercial service that once had been viewed as a welcome source of revenue. Its Public Regulated Service (PRS), equivalent to the GPS military code, was similarly counted on as a source of funds from national militaries.

The report throws cold water on both scenarios, saying combined revenue from the commercial service and PRS “could rise steadily, to reach an average of around 70 million euros, in the long term.”

The commission invites EU governments to view Galileo as something like free Internet — a service that generates almost no revenue on its own, but that provides benefits to society that generate economic growth.

The commission says the current Galileo budget is sufficient to field 18 satellites and the associated ground network by around 2014. Contracts for the construction of the satellites, and the launch of 14 of them, have been signed. The report does not say how the launch of the remaining four satellites, intended by 2014, will be financed.

Launch costs for this first group of satellites proved much higher than the commission’s initial forecasts, which some government and industry officials criticized at the time as being unrealistic. The commission repeats its previous assessment that “the monopoly situation” of the Arianespace launch consortium, which sells launches of Europeanized Russian Soyuz rockets and of the heavy-lift Ariane 5 vehicle, is the cause of the unpredictably high launch charges.

The commission’s rules forbade Galileo managers from considering launches aboard other Russian or Ukrainian rockets. International Launch Services (ILS) of Reston, Va., which markets Russian Proton launches, has invited the commission to consider broadening the launcher mix. Including the Proton vehicle, ILS says, will enable the commission to reduce future Galileo costs.

Government and industry officials familiar with Galileo have been aware for well over a year that the system’s budget was insufficient to deploy and operate the network. But they sought to downplay this fact in public settings out of concern that it would undermine future funding prospects.

While Paul Verhoef, the commission’s Galileo program manager, has warned of the financial shortfall, the commission has also been reluctant to lay the financial realities in front of its governments.

The commission has also refrained from asking for more Galileo money now given the troubled state of several EU members’ public budgets relative to these nations’ debt.

“The economic situation of the EU and its member states has led the commission not to seek, up to now, an allocation of additional resources within the current multi-annual financial framework, even though this is causing delays in the completion of the full deployment of Galileo, and an increase in overall costs,” the report says.

The next budget cycle begins in 2014, meaning there will be at least a four-year delay in the deployment of the full Galileo system.

A four-year delay between the first round of satellite orders and the second round will force up prices on the part of industry, said Francois Auque, chief executive of Astrium, which is leading the team building the first four Galileo validation satellites. These satellites are scheduled for launch in 2011 and 2012, to be followed by 14 more satellites under construction by OHB Technology of Germany.

In a Jan. 12 briefing with reporters, Auque urged the commission to find a way to order the remaining Galileo satellites starting this year, to permit industry to maintain its current Galileo satellite teams.

Jean-Jacques Dordain, director-general of the 18-nation European Space Agency, which is overseeing the Galileo system’s development under contract to the European Commission, said Jan. 14 he sees no immediate prospects for funding more Galileo satellites before 2014.

Peter B. de Selding was the Paris bureau chief for SpaceNews.