Tracking losses
October 7, 2010
As the US prepares to launch its third-generation global positioning system (GPS) and Russia and China push ahead with their own competing systems, the European Union continues to face delays and soaring costs with its prestige project.
The EU now calculates that the Galileo project will be completed by 2018 – nearly a decade later than initially planned – and will cost taxpayers an additional 1.5 to 1.7 billion euros, according to a report by the German government, which the German business daily Financial Times Deutschland obtained. Brussels also expects the venture to make losses in the long term, according to the report.
Galileo will include up to 30 satellites delivering geographical positioning data, similar to the data provided today by the GPS system developed and operated by the United States military. The first two satellites are to begin operating later next year.
Spiraling costs
But Galileo has had a tough time lifting off. In 2007, the EU had to take over the project after a consortium of eight European companies abandoned it, having failed to convince their banks that costs wouldn't spiral out of control. Ever since, the EU's executive arm, the European Commission, has been pouring money into the project.
The German government report claims that Galileo's operating costs, based on currently available assessments, will exceed revenues for some time to come. Even taking into account expected annual revenues of 100 million euros, the EU will still have to subsidize the project to the tune of 750 million euros a year. As a result, European taxpayers can expect to pay 20 billion euros over the next 20 years for the development, construction and operation of the system.
"Everyone knew there wouldn't be enough money," said Markus Kerber from the Berlin-based think tank Europolis. "Galileo is pioneer work – you make mistakes and the costs of these add up. On top of that, the European Commission isn't good at pioneer work."
US monopoly
But policymakers in Brussels are more than willing to fork out billions not just to create a new market for navigation-based devices and services but also to achieve a level of independence from the American GPS system, which still has a monopoly on navigation technology, according to Kerber. "It was a political decision in the US to have a satellite navigation system," he told Deutsche Welle. "And the same applies to Russia, China and, for that matter, Europe."
GPS emerged in the military in the 1960s. And since being formally opened to civilian users in 1993, the technology has become a popular feature not only in cars, boats and airplanes but also in cell phones, cameras and even pet tags.
"The question is: How high a price is Europe willing to pay for its independence in global navigation satellite services (GNSS)," said Rachel Villain, director of space industry research at Euroconsult in Paris. The delays to achieve operational capabilities, she told Deutsche Welle, will only add to costs and, equally concerning, competitors will be staking their claims in the meantime.
"There's no guarantee, for example, that the military forces of all European governments will move over to Galileo once it's up and running," Villain said. "Galileo promises more capabilities than existing GNSS systems but so does third-generation GPS."
Author: John Blau
Editor: Nicole Goebel