Monday, March 19, 2007

EU Warns Against Further Delays to Galileo System

DW, 18/03/2007

"The European Commission warned that it will examine new ways to complete the Galileo satellite navigation system after the project stalled amid doubts about profitability.
The system, worth around 1.5 billion euros ($1.95 billion) and meant to be in space in 2010, is aimed at breaking Europe's dependence on the free US Global Positioning System (GPS), used aboard many cars, boats and aircraft and providing Europe with commercial and strategic navigational autonomy.

In a letter sent last week to the European Union's German presidency, Transport Commissioner Jacques Barrot requested a mandate to study "reasonable alternatives" to the current Galileo consortium of eight private contractors.

Stepping up the rhetoric, he accused industry giants AENA, Alcatel, EADS, Finmeccanica, Hispasat, Inmarsat, TeleOp and Thales of being responsible for delays in the project.

Late, expensive, no one in control.
I consider that the delay so far accumulated and the absence of any sign of progress ... must now be considered as risk for the delivery of the project in the timeline that we envisaged," Barrot wrote.

"Moreover, we have to fear significant cost increases which could go well beyond the foreseen budget," he said in the letter, which was also sent to the eight contractors and the European parliament. "I will undertake to explore alternatives for delivering the project, based on a detailed technical, financial, program management review."

Barrot complained there was no single company structure to regroup the partners, nor any negotiator to speak with the Galileo Supervisory Authority, the public body overseeing the project.

Delays expected to continue

Negotiations to set up a consortium have been suspended as the companies involved are at loggerheads over sharing development costs, and a final agreement on a 20-year services and satellite contract is also unlikely to be completed before the end of next year.
Barrot's spokesman said the timetable for putting the system, to ultimately involve around 30 satellites, in place had already been delayed until 2011, and that more slippage was expected.

"More than ever we have a responsibility to make this project succeed, ensuring at the same time Europe's independence and excellence in a sector critical to our future competitiveness," Barrot added.

Can Galileo make a profit?

The Financial Times newspaper said there were doubts whether Galileo could attract enough revenue, as people within the project doubted whether it would restart unless there were guarantees it could win business from the free American GPS.

"There is a doubt over the revenues," an unnamed executive told the paper. "Why sell Pepsi-Cola when you can get Coca-Cola free?"

While it is difficult to see what real alternatives to the big eight Barrot has, the commissioner said he wanted to set a May 10 deadline for the companies to act, and expects to receive a mandate to make such a demand next week.
He said he would review the companies' reactions and recommend how the project should proceed to EU transport minister in June.

Competition moving forward

In contrast to GPS, which is run by the US Defence Department, Galileo will be used for civilian purposes only.

The European satellite navigation system will monitor natural disasters, in air and sea rescue services and a range of commercial uses, including possibly road safety and pricing.

The EU fears that China could launch a competitor before Galileo is fully operational. Russia is currently also improving its global satellite navigation fleet and will have spacecraft in orbit by the end of this year".


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