BRUSSELS — The government agency negotiating a 20-year contract with the industrial consortium that will operate Europe’s Galileo satellite navigation system expects a preliminary agreement to be concluded in two steps starting at the end of this month. The signing of the Head of Terms accord would be followed by a more elaborate document to be signed by December.

Settling the remaining financial details and concluding a final contract would occur in 2007, according to Rainer Grohe, executive director of the Galileo Joint Undertaking, which is negotiating the agreement on behalf of European governments.

Speaking at a Sept. 12 seminar here dealing with those Galileo services that will be regulated by governments, Grohe reiterated that the industrial consortium is expected to pay two-thirds of the cost of deploying the satellite constellation and completing its ground network. Galileo is a 30-satellite constellation whose design and early development have been paid for by European governments. Total investment so far has been about 1.7 billion euros ($2.2 billion).

Full deployment of the system is expected to cost another 2.2 billion euros, with industry paying two-thirds of that in return for its 20-year license to manage Galileo as a profit-making business. Government officials acknowledged here publicly for the first time that Galileo’s schedule has slipped by at least three years. Commercial operations now are not expected to start before 2011 — not 2008, as maintained until recently — and industry officials say there are doubts about 2011 as well.

Galileo’s first test satellite, built by small-satellite specialist Surrey Satellite Technology Ltd. of Britain, is in orbit. But the second satellite, built by Galileo Industries — the group favored to win the full constellation contract — is about a year behind schedule and will not be launched before early 2007. Four other Galileo test satellites under construction by Galileo Industries likely will not be in service until 2009, said Matthias Ruete, director-general of the European Commission’s Trans-European Networks division.

Many Galileo issues remain unsettled and have nothing to do with satellite schedules. Perttu Puro, Finland’s state secretary of transport and communications, said European governments have yet to agree on how Galileo’s Public Regulated Service will be managed and used. Finland holds the European Union’s rotating presidency.

Industry would like the European Commission to create regulations that mandate — or at least promote — the use of Galileo without infringing on the June 2004 agreement with the U.S. government that set the terms and conditions of Galileo’s coexistence with the U.S. Global Positioning System (GPS). GPS signals are made available free of charge by the U.S. Defense Department, which operates the constellation as a dual-use infrastructure.

Europe and the United States agreed that European regulations would not be used to discriminate against GPS. In addition, European Commission officials say their general policy is to create regulations that are technology-neutral.

For these reasons, Grohe said, it will not be easy to guarantee to the Galileo concession holder — especially not before the end of 2007 — that governments will assure the commercial viability of the 20-year concession by creating laws that force the use of Galileo. However, regulations could be crafted to play to Galileo’s strengths without discriminating against GPS or other, non-satellite technologies. “Revenues come from purely commercial applications, and also from public sources in areas where the only users are governments,” Grohe said. “In between the two, regulations are needed to develop markets.”

In the meantime, some private-sector applications are on hold as industry awaits word on what the regulatory regime will look like in the Galileo era. Peter Grognard, managing director of Septentrio, a navigation-terminal designer in Leuven, Belgium, said companies like his still do not know whether taxes or other charges will be added to Galileo-equipped terminals to help the concession owner make a profit.

Grohe urged European industry not to wait for regulatory clarity. China, one of two non-European partners in Galileo — the other is Israel — is already moving ahead, he said. “If you could see what China is doing to prepare for Galileo applications, you would be, shall we say, nervous,” Grohe said. “So we need to speed up.”

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