Loser: No Payoff for Galileo Navigation System
Europe’s answer to GPS isn’t worth it
Illustration: Bryan Christie Design
Suppose somebody offered you a free lunch at the best restaurant in Paris, Chez Gaston, complete with your favorite wine, a 500 bottle of Château La Mondotte Saint-Emilion. Would it really make sense for you to say no thanks, and then spend millions of dollars to open your own French restaurant in New York, with the stated intention of taking away Gaston’s business within five years?
This, in effect, is what Europe has been doing in the field of geopositioning, a rapidly growing multibillion-dollar business that soon will dominate all aspects of transportation and navigation and is sure to play a growing role in widely disparate activities from commercial fishing to emergency services.
The idea of a European geopositioning system similar to the U.S. Global Positioning System (GPS) and Russia’s Global Navigation Satellite System (GLONASS) originated a decade ago, when teams of engineers from France, Germany, Italy, and the United Kingdom developed a joint concept for an independent set of satellites that would provide superior accuracy and not be vulnerable to military cutoff. In March 2002, the European Union (EU) and the European Space Agency (ESA) agreed to proceed with the project, named Galileo, which they visualized as a public-private partnership that ultimately would pay for itself by providing premium paid services with encoded signals. Today the system is five years behind schedule and, in terms of public funding, at least a couple of billion euros over budget.
Galileo’s boosters often described the system’s commercial promise in extravagant terms, taking in even seasoned and tech-savvy journalists like T.R. Reid, the author of a history of the microchip. In another book, The United States of Europe (Penguin, 2004), Reid said that Galileo’s more accurate locational signals would “trump the American effort.” Due to be fully operational by 2008, Galileo would have “a four-year monopoly on the improved technology before Americans can catch up,” making the 4 billion system a profit center for the EU.
That enticing vision and the rationale for developing Galileo have since fallen into complete disrepute. The original plan was to launch four test satellites by about now and, in the period from 2006 to 2010, place 26 more 700-kilogram solar-powered satellites in three orbital planes at an altitude of 23 222 kilometers. The EU and ESA were to share the costs of the four test satellites. The private sector would cover two-thirds of the costs of the remaining satellites, and total system costs would be less than 4 billion.
But by the middle of last year, it was apparent that Galileo would become fully operational at least four or five years behind schedule and that system costs would exceed 5 billion, with the private sector making little or no contribution.
Galileo’s proponents said that its premium signals would provide positioning accuracy of 1 meter or better, greatly improving on the performance of GPS, whose accuracy was well above 5 meters on average at the beginning of this decade. But as early as 2004, average GPS accuracy improved to within 3 to 5 meters, and by 2012–2013 it is sure to be 3 meters or better.
There remains the question of signal access. Originally, the United States reserved the right to limit GPS accuracy for military reasons. But in May 2000, well before the Europeans decided to go ahead with Galileo, the U.S. president formally promised that the United States would no longer selectively degrade signals. The following years saw the blossoming of European businesses offering navigational and positional services based on the free U.S. signals, with nobody showing much anxiety about whether access to this public good would ever be denied.
With Galileo badly delayed and its commercial prospects dimming, the private aerospace consortia that were supposed to develop plans and put up money for the full Galileo fleet were unable to reach agreement: these were sprawling groups of big companies led by the European Aerospace Defense Corp., based outside Amsterdam, and Alcatel-Lucent, in Paris. In a ministerial meeting last June, it was decided to ditch the partnership and proceed with Galileo as a purely public undertaking.
Surprisingly, though the collapse of the public-private partnership sounded to many like Galileo’s death knell, some hailed the change. Martin Sweeting, group chairman of Surrey Satellite Technology Ltd. (SSTL), in Guildford, England, says that proceeding on a purely public basis might help break the hold that big aerospace companies have had on procurement, opening contracting to smaller, more nimble players. SSTL designed and built the first Galileo test satellite, Giove-A, for just 26 million, on budget, on time, and to specifications—as it boasts in its corporate literature.
Giove-B, the second test satellite, being built by European Satellite Navigation Industries (ESNI), is much more expensive—its cost is now estimated at more than 100 million—and it is way behind schedule. A joint venture of leading European space companies, ESNI, in Ottobrunn, Germany, was formed to develop Galileo’s infrastructure.
In March of last year, ESA contracted with SSTL to provide a third satellite, named Giove-A2, which will let Europe retain for an additional 27 months the frequency its predecessor satellite obtained from the International Telecommunication Union. If not for SSTL, Galileo would be in even deeper trouble.
SSTL may be but a small success story within a larger failure, but it’s not the only one. The European Geostationary Navigation Overlay Service (EGNOS), similar to the U.S. WAAS system, is a supplementary geopositioning system that will enable air traffic controllers to replace the current system of flight corridors with point-to-point routing. Planning for EGNOS preceded Galileo, and its preoperational testing, begun in 2006, is on schedule.
Consisting of three geostationary satellites and a ground station, EGNOS transmits signals that make it possible to refine the accuracy and reliability of the existing signals from navigational satellites to about 2 meters. Japan and India have been building similar supplementary systems for aircraft navigation; eventually, airline routing based on geopositioning signals will be universal.
Still, however you look at it, the commercial outlook for Galileo is grim. The United States is steadily improving its GPS system, and meanwhile, Russian president Vladimir Putin has repeatedly said that he considers improvement of GLONASS a top national priority. Russia planned to complete the system with the launch of seven additional satellites last year, to extend its reach into adjacent regions this year, and to go global in 2009.
In light of such developments and Galileo’s setbacks, the European Commission issued an important reassessment of the situation on 19 September 2007, “Progressing Galileo: Re-Profiling the European GNSS Programmes.” It estimated total revenues from Galileo over a 20-year period at 9.1 billion, or 455 million per year. That suggests the system could recover its total estimated investment costs of 5.4 billion in 12 years. But standard discounting of future earnings would stretch the payback period out considerably longer, and the commission concedes that eventual earnings could be only half the amount predicted (or, alternatively, one-third more).
Despite those very uncertain prospects, Sweeting believes that Galileo will go forward, once Europe’s leaders agree on where the added funds will come from, how its organizational structure can be streamlined, and where costs can be cut. But should it? Arguably, since the grand vision for Galileo has changed so fundamentally from what it was a decade ago when the project was first conceived, it now should be reconceived on a blank slate, and only then perhaps relaunched. Once seen mainly as a commercial and geopolitical competitor to GPS, Galileo should now be seen as a complement, intended in the long run to work compatibly with GPS, GLONASS, and any regional positioning system that comes down the pike.
GOAL: To create a 30-satellite geopositioning -system to provide greater accuracy than GPS or GLONASS, generating income from premium services that rely on encoded signals.
WHY IT’S A LOSER: Galileo is way behind schedule and over budget; meanwhile, GPS and GLONASS are -improving, so Galileo will never obtain the competitive edge that would have made it profitable. Also, its organizational structure is too complex. To succeed, it would need a single authority with wide operating latitude.
PLAYERS: The 27-state European Union and the 15-state (not perfectly overlapping) European Space Agency
STAFF: Too numerous and too dispersed to count
BUDGET: 5.4 billion (about US $8 billion) and counting; originally 4 billion