European Satellite Navigation Galileo Costs Launch Into Orbit

Europe's satellite navigation system Galileo may end up costing as much as €10 billion instead of the €3.4 billion currently on the table. It's just the latest setback in a series for the project.

When it comes to accuracy, Europe's satellite navigation system Galileo will, it is said, easily outdo America's Global Positioning System and Russia's Glonass arrangement. When it comes to predicting when the system might be finished and just how much it might ultimately cost, however, precision flies out the window. And the price tag may end up being drastically higher than thought.

According to information obtained by SPIEGEL, industry experts together with EU finance gurus have told their superiors that the current estimated cost of €3.4 billion may be radically exceeded. The final price will be at least €5 billion ($7.4 billion) and could climb to as high as €10 billion, according to the information. SPIEGEL also writes that an expert report produced for the German government likewise claims that even in a "best-case-scenario," the Galileo project will swallow up €1.5 billion ($2.2 billion) more than planned.

Experts say that the cost explosion is the result of a compromise, hammered out in November and December, securing EU-wide funding and dividing responsibilities. The agreement was hailed as the final hurdle still standing in front of the project's final completion, but one Galileo specialist told SPIEGEL that there are still many technical challenges awaiting the project.

Officials in Berlin denied the SPIEGEL report on Sunday, with a Transport Ministry spokesman saying that "the government has no information about any billion euro gaps." The spokesman also told the German news agency DPA that the €10 billion number has long been known and is based on estimated costs of both construction and operation.

Nevertheless, Galileo's recent history shows that such a dramatic budget shortfall would hardly be out of character for the program. As recently as 2006, Europe estimated that Galileo would cost €2.5 billion to build. Infighting among various European countries about satellite contracts have also slowed the project down as have budgetary questions and technical issues. The system was originally set to begin operation this year, but that date has continuously been pushed back. For now, the EU is hoping to have it operational by 2013.

Eating into Potential Revenues

Once it is finished, however, the system promises to offer positioning accuracy far exceeding that provided by the US system GPS and that of the Russian Glonass system. The system -- which will ultimately include 30 satellites orbiting the Earth, three of them being spares -- will also reduce European reliance on the US system and will offer private users a broad array of different services. Europe hopes the system will generate €9 billion per year in revenues and create thousands of jobs.

The constant delays, however, may be eating into those potential revenues. On Christmas Day, Russia sent three more satellites into orbit as part of its refurbishment of its Glonass navigation system. That system, short for Global Navigation Satellite System, now has 18 satellites in orbit, just six short of the 24 necessary for a true global system. It is set for completion in 2009.

The Chinese have likewise gotten in on the act, launching two more satellites for its Beidou navigation system. While not conceived as a global system, it could provide adequate coverage for China, thus depriving Galileo of potential subscribers there.


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