Communication from the Commission - Galileo - Involving Europe in a new generation of satellite navigation services
Date: 1999-02-10
Institutions: European Commission
Subjects: EU programme, international cooperation, satellite communications, trans-European network, transmission network

COMMISSION OF THE EUROPEAN  COMMUNITIES 

Brussels,  10.02.1999 

COM(1999) 54 final 

COMMUNICATION  FROM THE  COMMISSION 

Galileo 

Involving Europe in a New Generation of Satellite Navigation  Services 

EXECUTIVE  SUMMARY 

1. 

Introduction 

2.  The challenge facing Europe 

2.1.  The issues at stake 

2.2.  Timing considerations 

iv 

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3.  Recent  Developments  and  Preliminary  Conclusions  on  the  Strategic  Choices  for 
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Europe 

3.1. 

Joint development of a system: potential for co-operation with the US 

3.2.  Joint development of a system: the Russian Federation 

3.3.  Japan as potential partner for a joint development of a system 

3.4.  Other countries and regions as potential partners for  a joint  development  of 

a system 

3.5.  GNSS-2 Forum 

3.6.  The European Parliament 

3.7.  Rejecting the 'Zero Option' 

4.  System Architecture and Technical Features 

4.1.  Performance requirements 

4.2.  Security issues 

4.3.  Requirements of GNSS Ground Network 

4.4.  Signal structure 

5.  Financial Aspects 

5.1.  Estimated costs 

5.2.  Sources of public funding  for Galileo 

5.3.  Potential revenue streams enabling public-private partnership 

5.4.  Establishing a public private partnership 

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AiU 

6.  Organisational Framework 

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6.1.  Designing, building  and operating  Galileo: basic principles  and  immediate 

decisions 

6.2.  Strategic Aspects 

6.3.  The development phase 

6.4.  The Operation phase 

6.4.1.  Galileo management 

6.4.2.  Galileo operation 

6.5.  Securing Radio Spectrum 

6.6.  Regulatory Co-ordinator 

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7.  The  feasibility  of,  and  possible  partners  for,  a  joint  development  of  a  system: 
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concluding agreements 

8.  The Way Forward: Implementing the Strategy 

26 

Annex I 

Galileo Development  Scenario 

Annex II a)  Main Characteristics of Orbits Considered for  Galileo 

Annex II b)  Acronyms 

Annex III a)  Financial  Statement 

Annex III b)  Galileo -  detailed breakdown of costs 

Annex IV 

Market analysis and economic  benefits 

44 

EXECUTIVE  SUMMARY 

This Communication  sets out a strategy to secure a full role for Europe in the development of 
the next  generation  of Global Navigation  Satellite  System  (GNSS)  and  so full  opportunity  in 
the related market. The central recommendation  is that Europe  should develop  a new  satellite 
navigation constellation, combined with appropriate terrestrial infrastructure:  Galileo. 

The EU is  faced  with  a formidable  challenge but  also with  a major  opportunity  in respect  of 
global satellite navigation which is becoming central to all forms  of transport  and many other 
activities. These systems will play  a crucial role in creating the integrated  European  transport 
system  that  is  crucial  to  support  the  single  market.  Further,  EU Member  States have  public 
obligations  to provide  safe  navigation  services and other public  services  (for  example,  search 
and rescue) and GNSS can be the most cost-effective  means of achieving this. 

The issue is not, therefore, whether Europe  should rely on satellite navigation  systems  for the 
future,  but  what  economic  benefits,  including jobs,  it would  gain  from  playing  a full  role  in 
development  of the system, and what degree of control it will have over the systems on which 
its safety critical services will depend. 

Last year, the Commission  identified  the following  problems with continued reliance on third 
countries' systems1: 

•  There  are  serious  problems  of  both  sovereignty  and  security  if  Europe's  safety  critical 
navigation  systems  are  out  of  Europe's  control.  Furthermore,  the present  systems  cannot 
fully  meet civil users requirements in terms of performance. 

•  There is a need to ensure that European users are not at risk from  changes in the service or 
excessive  future  charges  or  fees:  faced  with  a  dominant  position  or  virtual  monopoly,  it 
would  be  difficult  to  resist  such  charges  and  perhaps  impossible  to  develop  alternatives 
quickly. 

•  The capacity for EU industry to compete in this lucrative market (a potential global market 
of €40  billion  by  2005) would  be  seriously  constrained.  (Europe's  capacity  to  compete  in 
the  market  for  services  could  be  undermined  if  it  did  not  have  equal  access  to  the 
technological developments in the system itself). 

The strategic choice 

Work  by  the  Commission  over  the  last  year  has  focussed  on  two  key  areas:  identifying  the 
scope  for  joint  approaches  with  the  US,  the  Russian  Federation  and  others,  and  clarifying 
what  a European  system would  look like, and how much it would  cost. With  a clear view on 
both these points, the EU is now in a position to make the key choices. 

As  the  communication  makes  clear,  an  urgent  decision  is  needed:  the  US  is  committed  to 
developing  GPS and reinforcing  its global dominance. They already have a head  start. Unless 
Europe  gives  a  firm  political  commitment  now  to  developing  a  European  system,  to  be  in 
place at the same time as the next generation of GPS, it will simply be too late. 

1  Communication  'Towards  a Trans-European  Positioning  and Navigation  Network  -  including  a European 

strategy for Global Satellite Navigation  Systems (GNSS),' COM (98) 29 final of 21 January  1998 

HL 

The shape of Europe's 'best buy' is now relatively clear: 

•  It  must  be  an  open,  global,  system,  fully  compatible  with  GPS, but  independent  from  it, 

with a significant role for the Russian Federation. 

•  It should be based on medium Earth orbit (MEO) satellites and will cost between €2.2  and 

2.9 billion; 

•  It should be developed as a public private partnership, with significant  funding  at European 

level, and reliance on creating new revenue streams. 

The Commission  considers that this option provides  a means  of achieving  Europe's  strategic, 
commercial, transport  and employment objectives  at an acceptable  cost. It is therefore  clearly 
preferable  to the 'zero option'  (relying on the existing military constellations). 

Scope for international  co-operation 

In last year's communication, three broad options were  identified: 

-  a joint global system with all the major players; 

- 

the EU developing a GNSS with one or more international partners (particularly, the US or 
Russia); 

- 

independent development by the EU of its own system. 

The  Commission  recognised  that,  in  principle,  joint  development  of  the  next  generation 
GNSS was likely to be the most cost-effective  option, but made clear that co-operation would 
need to satisfy  certain conditions: firm  guarantees against  disruption,  full  participation  in the 
future  design,  development  and  operation  of  GNSS,  a  full  EU  role  in  the  control  of  the 
system,  and  an opportunity  for  European  industry  to  compete  in  all  segments  of the  market. 
The Council  endorsed this approach  and requested  the Commission to intensify  contact with, 
in  particular,  the  US  and  the  Russian  Federation.  Following  extensive  contacts,  the 
Commission has now reached the following  conclusions on the scope for joint  development. 

The  US  is  not  willing  to  share  control  of  GPS  (primarily  for  military  reasons)  though  it  is 
positive  about  co-operation  in  certain  technical  areas.  They  also  recognise  that  two 
complementary  systems  (GPS  +  Galileo)  will  increase  overall  robustness,  allowing  satellite 
navigation  and  precision  timing  to  be  employed  in  more  critical  applications  (e.g.  as  sole 
means  of  navigation  for  certain  operations)  or  more  difficult  areas  (e.g.  in  cities).  It  is 
proposed that this co-operation should be pursued. 

The  Russian  Federation  is  offering,  effectively,  full  partnership  in  developing  a  new 
international  civil  system  from  the basis  of the present  GLONASS. The principal  advantages 
of this  approach  would  be  that  Europe  could,  through  use  of  Russian  know-how  in  satellite 
operation and control, develop a robust Galileo more quickly than otherwise. This would  also 
allow shared use of the valuable GLONASS frequency  allocation. 

The  recommended  approach  is,  therefore  to  develop  a  Galileo  which  is  global  in  coverage 
from  the outset and independent  from  the US GPS, but fully  interoperable with it. This would 
be  open to participation  by  other partners. In particular,  there  could  be major  advantages  for 
Europe  from  Russian  involvement,  if  this  can be  established  on  a  satisfactory  basis.  Within 
the constraints of interoperability with GPS, it would exploit new, state-of-the-art  capabilities, 

U 

allowing  the  development  of  new  applications,  making  the  overall  GNSS  robust  and 
remedying  certain  shortcomings  of the present  GPS  (e.g. poor  availability  in urban  areas and 
the  northernmost  latitudes,  unpredictable  temporary  gaps  in  coverage,  including  over  the 
European continental landmass). 

What system to choose 

The proposal  for  Galileo  is based  on  a core  constellation  of  MEO  satellites,  combined  with 
appropriate  infrastructure  and  terrestrial  systems  to  provide  the  integrated  service  required 
from  the  Trans-European  positioning  and  navigation  network.  This  approach  represents 
minimum  technical  risk,  since  existing  systems  use  this  technology,  particularly  if  co 
operation with the Russian Federation can be established on a satisfactory  basis. The approach 
would need to be global  from  the outset if Europe is to reap the benefits  of a global presence 
and provide a global market for the system and its applications. 

Finance 

The  key  question  is  how  Europe  should  finance  a  system.  As  long  as  the  US  continues  to 
provide its basic GPS signal free of charge, it is clear that European public spending would be 
needed for the development of Galileo. A three point financing  strategy is proposed: 

•  substantial  financing  at  European  level,  through  the  EU  Budget,  notably  the  Transport 

TEN, and through ESA; 

•  establishment of revenue streams, which is likely to require regulatory action ; and 

•  developing a public private partnership  (PPP), to deliver complementary  finance  and value 
for  money.  However,  firm  political  decisions  are required  to  give industry  the  confidence 
to invest. 

As far  as EU funding  is concerned, it is suggested that around €500  million (10% of the total 
budget  for  transport  TENs  proposed  by  the  Commission  in  Agenda  2000)  could  be  made 
available  from  the TENs Transport budget  (ESA envisages being  able to  contribute  a similar 
amount).  A  further  €120  million  or  so  for  research  and  development  activities  could  come 
from  the  5th  Framework  Programme,  with  further  funding  possibly  available  from  a  6th 
Framework Programme. 

A  number  of  possible  revenue  streams  have  been  identified,  notably  the  idea  of  a  levy  on 
GNSS  receivers,  together  with  charges  for  a  restricted  access  service  which  could  provide 
guaranteed  levels  of performance,  liability cover,  etc. These  could  contribute  significantly  to 
financing  Galileo if the Council is minded to put the appropriate regulation in place. 

A PPP  for  Galileo  could provide  complementary  finance,  improve project  design  and  ensure 
overall value for money. Crucially, it would confirm private sector commitment to the project. 
In  particular,  the  need  to  encourage  take-up  of  the  service  in  order  to  generate  income  and 
reach  profitability  would  provide  a powerful  mechanism  for  ensuring  users' needs  are  given 
central importance, while a PPP structure will help keep costs under control since much of the 
risk  of  construction  cost  over-run  would  normally  fall  on  the  private  sector.  It  would  also 
reflect  the fact  that  Galileo  combines public  service  and commercial  aspects. The aim would 
be  for  the  project  to  approach  self-financing  in  the  operational  phase  when  recurring  costs 
(operations and replenishment) would amount to between €140  million and €205  million per 
year. 

/\JL 

The  ideal  approach  would  be  to  set  up  a  full  PPP  as  soon  as  possible.  This  would  be  the 
design-build-operate  model.  But  this  will  require  a  significant  amount  of  further  work  on 
performance  requirements,  risk  allocation  and revenue  streams. Each of these  areas needs to 
be  explored  in  co-operation  with  the  private  sector.  This  would  be  a  central  part  of  the 
Definition phase of the project. 

Organisational  issues 

Galileo would be a unique project, involving a wide range of political, economic, security and 
commercial  interests.  It  will  need  an  organisational  structure  that  reflects  this  unique 
character.  A number  of issues  affect  the  organisational  structure.  A PPP  carries  implications 
for  organisational  structure: the aim will be to establish  a  'vehicle  company'  to  carry out the 
deployment  and  subsequently  operate  the  system.  However,  some  central  aspects  of  Galileo 
fall  firmly  within the public  domain. Involving  international partners in Galileo  would  imply 
that they would need to be part of decision-making  structures. 

Three basic levels are  identified: 

•  Political/strategic,  providing  overall  direction,  and  handling  main 

international 
negotiations.  It  is  recommended  that  the  EU  institutional  framework  would  be  used  for 
strategic  decisions.  The  Commission  should  then  lead  the  international  negotiations, 
initially  with  the  US  and  Russian  Federation,  on  the basis  of  guidelines  adopted  by  the 
Council. 

•  The Programme Management  Board which would be responsible  for  ensuring  the  project 
is  completed,  with  financial  decisions,  and  for  establishing  the  terms  of  any  tender,  and 
have the  contractual  relationship  with the PPP  vehicle  company.  In  the  operation  phase, 
this would become the Galileo  administration. 

•  The PPP vehicle company. 

But not  all decisions need to be taken now, and the project  should now pass to the  definition 
phase,  financed  by  public  money,  in  which  the  work  necessary  to  put  in  place  the  final 
structures, especially the PPP, is carried out. 

Recommendations 

The Community institutions are, therefore, invited to: 

- 

take  a  firm  political  decision  to  develop  Galileo,  as  described  above,  which  represents 
minimum technical risk and best value for money, in order to guarantee Europe's  strategic 
interests; 

-  endorse 

the 

three  point  financial  strategy:  substantial  European 

financing, 
development  of revenue  streams,  and  a PPP  approach.  In particular,  endorse  Galileo  as a 
key  priority  under  the  TENs,  to  benefit  from  funding  on  a multi-annual  basis  (estimated 
€500 million over the period 2000-2006) 

level 

- 

recognise  the  need  for  negotiations  and  technical  discussions  with  third  countries.  The 
Commission should be requested to negotiate suitable agreements on GNSS on the basis of 
guidelines to be adopted by the Council. 

-  agree  the  organisational  approach  for  the  project  definition  phase,  with  urgent  efforts  to 

establish the permanent structures  identified. 

A' 

1. 

INTRODUCTION 

In  its  conclusions  of  17  March  1998  on  the  European  Commission's  communication 
'Towards  a  Trans-European  Positioning  and  Navigation  Network  -  including  a  European 
strategy for  Global  Satellite Navigation  Systems  (GNSS),' the European Union (EU)  Council 
of Ministers  requested  the  Commission  to  present  recommendations  on  the  future  European 
approach to global satellite navigation. 

The Commission was requested  to intensify  its contacts with  important  international  partners 
such  as the  United  States  of  America  (US)  and  the  Russian  Federation,  so  as to  assess  the 
potential  for joint  development  of  a  system  that  meets  the  Community's  requirements.  The 
Commission  was  also  asked  to  accelerate  its  work  to  examine  the  option  of  developing  an 
autonomous European satellite navigation system. 

In  January  1999,  the  European  Parliament  adopted  a  Resolution  on  the  Commission's 
Communication2.  This,  inter  alia,  called  upon  the  Member  States  of  the  EU  to  convene  a 
European  Space  Council  at  the  Head  of  State  or  Government  level  and  requested  the 
Commission to present as soon as possible a coherent strategy for the development of a Trans-
European positioning and navigation network. 

Since  March  1998,  an  unprecedented  number  of  meetings  of  the  major  actors  of  a  future 
satellite  navigation  system  has taken place, involving  several hundred  of the most  important 
players in the field. Equally, a dense schedule of meetings with international partners has been 
followed.  This Communication reports on the results of the work carried out this last year and 
proposes  a  European  strategy  for  the  medium  term,  together  with  an  implementation 
programme. 

The  intention  is  to  enable  the  Community  institutions  to  take  the  necessary  decisions  on 
implementing  a European contribution to the next generation  GNSS.  In this  Communication, 
the European project that will result has been provisionally called Galileo. 

The  Communication  therefore 
includes  a  set  of  policy  conclusions,  and  the  list  of 
supplementary  actions  that  need  to  be  accomplished  over  the  next  few  months.  The 
Commission  will  also  soon  produce  negotiating  guidelines  in  order  to  have  the  appropriate 
international agreements in place in time. The three key points are to agree that Europe should 
develop  Galileo  as soon  as possible; to agree the general  architectural  design  of Galileo; and 
to establish an appropriate financing  framework,  with maximum private sector involvement as 
early  as  possible  (Public-Private  Partnerships)  and  earmarking  of  the  necessary  public 
funding.  Developing  an  adequate  regulatory,  operational  and  project  management  structure 
will be a major priority for the next stage. 

2. 

THE CHALLENGE FACING EUROPE 

2.1.  The issues at stake 

The EU is faced with a formidable  challenge but also with a major  opportunity. 

A4 -  0413/98,  13 January  1999. 

^ 

Strategic  considerations: At present,  there  are two  core  Global Navigation  Satellite  Systems 
-  the US  GPS  and  the Russian  Federation's  GLONASS  -  and  GPS  currently  dominates  the 
market.  GNSS  is becoming  central not  only to  all  forms  of transport,  but  also  to many  other 
activities.  For  example,  manufacturing  industries  and  the  service  sector  increasingly  depend 
on GNSS for positioning and/or precision timing. This reliance raises important questions of a 
strategic nature, including for the Common Foreign and Security Policy, especially if the core 
systems are not under European control or influence. 

Europe  is now  in  a position  to  decide whether  to  develop  a new  system.  The challenge  is to 
guarantee  Europe's  strategic  needs without  excessive  cost  or risk.  By  contrast,  failure  to  act 
would  strengthen  the present  US  market  dominance  and  leave  Europe  entirely  dependent  on 
the US for many security-related matters. 

Galileo  gives  Europe  clear  opportunities  for  strengthening  political  ties with  other  countries. 
The US and Europe have already recognised that co-operation could be mutually beneficial, at 
least in the field  of civil applications, and co-operation with the Russian Federation could also 
have  considerable  mutual  benefit,  strengthening 
the  Partnership  and  Co-operation 
Agreement3. Other countries may also become partners in the venture, increasing  international 
co-operation  and  supporting  global  market  development  and  both  inward  and  outward 
investment. 

The  transport  dimension:  It  is  clear  that  satellite  navigation  will  increasingly  play  a 
fundamental  role in transport in the future.  GNSS will be part of an intelligent  infrastructure, 
helping  to  ensure  safety4,  streamline  traffic  operations, reduce  congestion  and  environmental 
damage  and  support  multi-modal  development.  Advanced  navigation  systems  are  a 
prerequisite for efficient  transport management and sustainable mobility which are themselves 
critical for economic growth. 

Further, under different  international Conventions, EU Member States have public  obligations 
to provide safe  navigation  and certain other public  services  (for  example,  search  and rescue). 
A  coherent  Galileo  programme,  integrating,  as  appropriate,  other  systems,  can  ensure  cost-
effectiveness  and potentially allow considerable economies to be made in public spending. 

Galileo  could  also  remedy  shortcomings  of  the  present  GPS  and  GLONASS  constellations 
which cannot guarantee the reliability and availability which is indispensable for transport and 
vital  economic  operations.  Further,  one  potential  advantage  of  having  two  independent  but 
compatible  space navigation  systems (GPS + Galileo) is that  each system  acts as a backup to 
the  other,  so  that  it  becomes  possible  to  base  safety-of-life  applications  solely  on  satellite 
navigation.  The  satellite  service  can thus  supersede  certain terrestrial  infrastructure,  resulting 
in further  substantial savings on operation and maintenance. 

Agreement  on  Partnership  and  Cooperation,  signed  on  24  June  1994  by  the  European  Union  and  the 
Russian  Federation.  It  represents  a  commitment  from  both  sides  to  promote  and  encourage  political, 
economic and scientific  partnerships. 

The  GNSS  Strategic  Study,  carried  out  for  the  Commission  in  April  1998,  noted,  for  example,  that 
combined  transport-related  communication  and  GNSS  navigation  data  could  be  directly  beneficial  to  rail, 
assisting  in  train  control  and  collision  avoidance,  especially  where  it  is  uneconomical  to  provide  the 
electrical power needed for passive sensor beacons or track-side vandalism is a problem. 

The  economic/industrial  dimension:  The  Commission  Communication  of  January  1998 
outlined  the  vast  array  of  potential  applications  for  a  satellite  timing,  positioning  and 
navigation  system  and  the  economic  opportunities  these  offer  (a  potential  global  market  of 
€40  billion  by  20055).  Almost  every  day  new  applications  are  being  added  to  the  list  of 
services  which  are  based  on  GNSS.  The  challenge  is  to  ensure  that  Europe  can  take  a  fair 
share  of  the  global  market,  and  the  related  jobs.  User  demand  for  GNSS-based  goods  and 
services is increasing  quickly. The GPS hardware market  in Europe was estimated  in  1997 at 
$228.7 million  and  is anticipated  to  grow to  $960 million  in 20046.  Annex  IV  gives  further 
detail  on  future  market  prospects.  Further,  establishing  a  fully  robust  GNSS  infrastructure 
would  accelerate  the  development  and  introduction  of  a  wide  variety  of  value  added 
applications  for  all  transport  modes  over  large  geographical  areas,  thus  bringing  the  socio 
economic benefits  which result from these  services much  earlier7.  In this respect,  Galileo  can 
contribute  significantly  by  bringing  new  levels  of  performance,  increasing  GNSS  service 
availability  and providing  guarantees  and  liability  cover which will both  support  the  general 
market growth and attract particularly those customers requiring high standards. 

The  Galileo  debate  over  the  last  few  months  has  demonstrated  the  project's  potential  for 
developing  interest  and  increasing  awareness  for  commercial  applications.  The  European 
Parliament  has  emphasised  the  advantages  of  creating  a  'general  culture  of  using  space 
applications  technologies'  which  could  be  ensured  through  the European  participation  in the 
development of GNSS. 

It  is  recognised  that,  with  European  involvement  in  the  evolving  signal  structure  and  the 
possibility  of  adapting  the  programme  to  users'  future  requirements,  Galileo  should  help 
industry  stay  at  the  leading  edge  of  the  development  of  future  applications.  Moreover,  the 
existence  of  a  competitive  system  to  GPS  would  ensure  that  no  unilateral  decisions  on 
charging could be taken which would destabilise industrial planning. 

Over  the  last  decade,  space  has  increasingly  become  an  area  for  commercial  exploitation. 
Telecommunications  and  broadcasting  are  two  examples.  There  is  fierce  competition  in  the 
deregulated  fields  and major  players  are increasingly joining  forces  to generate  economies  of 
scale. In Europe too, the space industry is restructuring to take on the challenge that it faces in 
global  competition.  Giving  a  political  direction  for  Galileo  would  support  the  space  and 
defence  industries  in  their  restructuring.  The political  lead  could  bring  added  value,  helping 
ensure Europe's position in this strategic sector. 

The  ESA-funded  GNSS-2  Comparative  System  Studies  have  identified  a  number  of  important  political 
benefits  from  a Galileo  over and above  a GPS-only baseline, in part  due to the  improved  performance  of a 
joint GPS/Galileo  system. These include an additional €40  billion from sales of equipment, and €40  billion 
from  value  added  services  for  European  firms  over  the  period  2005-2023.  Other  analysis  has  focused  on 
benefits  to  transport  users,  although  the  increasing  integration  of  navigation  and  communication  services 
will  fuel  the  already  significant  growth  in non-transport  applications.  Between  the  major  transport  modes, 
expected total benefits  are in the region of €18 billion over the first five years of operation of Galileo. 

Report  by  Frost  and  Sullivan,  quoted  in  Global  Positioning  System  Market  Projections  and  Trends  in  the 
Newest  Global Information  Utility,  International  Trade Administration,  Office  of Telecommunications,  US 
Department of Commerce. 

The implementation  of many value added mass market applications, most notably  for road transport,  would 
be  accelerated,  with  market  saturation  reached  10 years  earlier  (GNSS-2  Forum  Technical  and  Financial 
Group Report, December  1998). 

There  is  also  an  increasing  need  to  develop  synergies  between  the  existing  national  space 
agencies  and  with  ESA  and  to  establish  the  right  co-ordination  with  the  wider  European 
political  institutions  (EU,  WEU8).  Galileo  could  provide  the  catalyst  to  allow  an  exemplary 
division of labour between the different  actors and institutions to develop. 

Employment:  The  presence  of  European  industry  in  this  high  technology  field,  which  is 
beginning  to  develop  exponentially,  will  help  to  secure  and  augment  employment.  It  is 
estimated  that  putting  the  satellite  navigation  infrastructure  into  place  would  support  20,000 
jobs;  its  operation  would  create  2,000  permanent  jobs  with  considerable  new  employment 
opportunities in applications (hardware and services) 9. 

Regulatory  issues: Increasingly,  European  regulatory  requirements  could  envisage  the use of 
information  systems relying on positioning and/or timing signals. This could, for  example, be 
the  case  in  the  future  for  electronic  fee  collection10,  in  the  environmental  field  or  in 
agricultural  or fisheries  surveillance. A Galileo would  allow  for  the necessary  certification  to 
take place  (something  which  is not  possible with  current  systems), thus  ensuring  regulators' 
and users' confidence  in the adequacy of such systems. Regulatory action could thus underpin 
Community  objectives. 

2.2.  Timing  considerations 

An early decision is important,  as a rare window of opportunity is open. The US has taken its 
basic decisions on the design of the next generation of GPS satellite (block IIF), including the 
definition  of  a  second  civil  frequency,  and  will  be  deploying  the  new  satellites  in  the  next 
decade. If Europe waits, the new block IIF will reinforce  the present  GPS dominance  and the 
market  will  have  adopted  GPS  as  the  standard.  Realistically  Europe  could  then  play  only  a 
supporting role. 

By  contrast,  action  now  would  permit  Europe  to  develop  an  improved  service  (signal 
structure,  power  levels,  etc)  which,  though  interoperable  and  fully  compatible  with  GPS, 
would  give  Europe  a  real  possibility  to  penetrate  the  market.  Galileo  could  be  deployed 
considerably  quicker  than  otherwise, making  it more  competitive,  if Europe's  approach  were 
to build  on GLONASS, provided  that  serious attention is given  to building  confidence  in the 
system and promoting it globally. The challenge is to act decisively and in time. 

A  decision  has  to  be  taken  as  early  as  possible  in  1999,  establishing  a  medium-term 
policy  for  Europe's  involvement  in  the  next  generation  satellite-based  positioning, 
navigation  and timing  systems. No  decision  is, by  default,  a decision  to  exclude  Europe 

Western  European  Union,  composed  of  Belgium,  France,  Germany,  Greece,  Italy,  Luxembourg, 
Netherlands,  Portugal,  Spain  and  UK.  It  also  has  a  number  of  Associate  Members  (Iceland,  Norway, 
Turkey),  Associate  Partners  (Bulgaria,  Czech  Republic,  Estonia,  Hungary,  Latvia,  Lithuania,  Poland, 
Romania, Slovak Republic, Slovenia), and Observers (Austria, Denmark, Finland, Ireland,  Sweden) 

Current estimates within the ESA GNSS-2 comparative  study suggest a Galileo project  would  also  increase 
employment  in  equipment  production  and  sale  from  less  than  25,000  (based  on  GPS  alone)  to  around 
70,000 (GPS + Galileo)  in 2008. In total, therefore,  it is anticipated  that, by 2008, in the region  of  100,000 
jobs in direct, indirect and induced employment depend on going ahead with Galileo. 

10 

Commission Communication on electronic fee collection, COM (98) 795 final of 21 December  1998. 

from  the  development  of  a  strategic  sector  and  the  definition  of  new  global  standards, 
with serious consequences for strategic, economic, industrial, employment  and transport 
policies;  a  deferred  decision  will  also  mean  that  US  dominance  will  be  further 
consolidated,  so  Europe  will  find 
it  considerably  more  difficult,  and  probably 
impossible,  to enter the market,  and will  essentially  have to  accept  the  standards  set by 
the  US. A  long-term  EU  commitment  needs to be  given  to  generate  the  development  of 
market applications and support private investment in the system. 

3. 

RECENT  DEVELOPMENTS  AND  PRELIMINARY  CONCLUSIONS  ON  THE  STRATEGIC 

CHOICES FOR EUROPE 

In last year's communication, three broad options were identified: 

-  a joint global system with all the major players; 

- 

the EU developing a GNSS with one or more international partners (particularly, the US or 
Russia); 

- 

independent development by the EU of its own system. 

Extensive contacts with our international partners have made it possible to narrow down these 
options considerably. 

3.1.  Joint development of a system: potential for co-operation with the US 

In view  of this  considerable  challenge  facing  Europe, the March  1998  Council  requested  the 
Commission  to  explore  with  the  US  the  possibility  to  develop  a  common  system.  Three 
sessions  of discussion  took place with the US  (in May,  July  and November  1998). It  rapidly 
became clear that the US could not consider future joint  ownership  and a full  role for  Europe 
in  the  control  of  the  basic  24-satellite  GPS  constellation  (primarily  because  of  military 
considerations).  Co-operation with the US would therefore need to be based either on reliance 
on  the  existing  US-controlled  GPS  or  on  developing  a  GNSS  based  around  two 
complementary  satellite  navigation  systems,  one  GPS  and  one  European/international. 
Besides  clarifying  and  reducing  the  number  of  options,  the  useful  discussions  with  the  US 
administration  allowed progress to be made towards establishing principles which could  form 
the basis of a future  co-operation  agreement. 

Baseline for  US-EU co-operation 

From  the  US  perspective,  in  both  cases,  fruitful  co-operation  with  Europe  would  only  be 
possible if Europe accepted the GPS standard positioning service (SPS) and signal structure as 
a  basis  for  all  civil  applications  of  the  future  GNSS.  This  would  avoid  proliferation  of 
different  systems and also ensure the policy stability which is important  for industrial reasons. 
If  Europe  committed  itself  to  GPS  as  a  global  standard,  the  US  would  consider  European 
participation  in  the  process  of  developing  and  modernising  the  GPS  system,  as  well  as  an 
appropriate EU role in civil operations and management. The US would  also consider making 
a statement of intent to provide continued access to the GPS signal, free of direct user charges, 
to  discontinue  Selective  Availability  and  to  observe  an  agreed  notice  period  prior  to  any 
planned  withdrawal  of  the  GPS  signal.  If  the  EU  decided  to  invest  in  developing  and 
implementing  a constellation  which  complemented  GPS, the joint  EU/US  objective  could be 

to  establish  a fully  interoperable,  global  system  consisting  of  two  independent  components. 
There is consensus between the US and Europe that two independent  systems would  improve 
the  robustness  and  the  possible  performance  of  the  overall  GNSS  system  and  might 
potentially  allow  sole use  as  a means  of navigation  for  certain  safety-related  activities.  Such 
an orientation  could  have  considerable  implications  for  the way  Galileo  develops  and  for  its 
cost-effectiveness. 

3.2.  Joint development of a system: the Russian  Federation 

Discussions  with  the  Russian  Federation  took  place  in  May,  July  and  October  1998.  The 
Russian Federation has proposed a joint approach to develop a state-of-the-art  global navigation 
satellite  system  and  appears  willing  to  meet  the  requirements  outlined  in  the  Commission's 
communication of January  1998, and endorsed by the Council, allowing for joint ownership and 
management  of the  future  constellation.  The  Russian  authorities  have  developed  a  transition 
plan  for  GLONASS which would  include  its  transfer  to  civil  control  and  its promotion  as a 
system  for  civil  use11.  It  would  initially  be  an  independent  complement  to  GPS  and  would 
gradually  evolve into Galileo (progressively improving the robustness and performance  of the 
overall GNSS system). 

The  principal  advantages  of  this  approach  would  be  that,  if  co-operation  developed 
satisfactorily,  Europe  could,  through  use  of Russian  operational  know-how,  develop  Galileo 
in  a  much  shorter  time  than  otherwise,  and  that  it  would  allow  the  valuable  GLONASS 
frequency  band  to  be used,  despite  the present  strong  competition  for  access to  scarce  radio 
frequencies,  especially for  commercial telecommunications.  It would not  limit options  for the 
future. 

In  this  scenario,  a  gradualist  approach  would  be  pursued,  beginning  with  a  political 
framework  to  facilitate  initially  the  exchange  of  know-how  between  industrial  actors,  while 
possible  operational  arrangements  are  explored.  This  would  be  set  in  the  context  of  the 
Partnership  and Co-operation Agreement, taking full  account of EU security interests, and the 
objectives of the Common Foreign and Security Policy. 

3.3.  Japan as potential partner for a joint development of a system 

Japan has  issued  a joint  statement with  the US to recognise  GPS  as  a global  standard.  This is 
designed  primarily  to  encourage  a  market-led  development  of  applications  based  on  satellite 
navigation.  However,  it  does  not  undermine  possible  alternative  approaches  to  GNSS-2  or 
preclude R&D  efforts.  Although Japan is thus concentrating  at this  stage on  GNSS-1, they are 
increasingly  showing  interest  in  Europe's  attitude  to  a  possible  GNSS-2.  Building  on  the 
constructive  dialogue  which  has  developed  to  ensure  interoperability  between  the  respective 
GNSS-1  space-based  augmentations  (EGNOS  and  MS AS),  Japan  may  become  interested  in 
being involved  in a Europe-led  development  of a Galileo  space  segment.  This could  thus help 
reduce  calls  on  the  European  public  purse.  A  decision  to  go  ahead  with  Galileo  should  be 
accompanied by continuing discussions on the possibility of Japan taking a significant  role in it. 
Exploratory  discussions  should  therefore  rapidly  take  place  with  appropriate  ministries  and 

11  The  launch  on  30  December  1998  of  three  new  satellites  demonstrates  the  Russian  Federation's 
commitment,  despite  economic pressures, to maintaining  GLONASS. A further  launch is being planned.  A 
modernised  GLONASS  satellite  with  longer  life  expectancy  has  been  designed  but  further  improvements 
are foreseen  through integration of Western standards. 

agencies  on  possible  future  co-operation.  Industrial  co-operation  appears  to  provide  an  early 
opportunity to develop the relationship. 

3.4.  Other countries and regions as potential partners for a joint development of a 

system 

As regards other countries, several have indicated interest in co-operating with the EU to obtain 
benefits from GNSS-1 and to consider GNSS-2. Such co-operation could remedy deficiencies in 
present  navigation  infrastructure,  create  the  full  global  market  opportunities  that  have  been 
recognised and support effective  development  of industrial co-operation. It should, however, be 
clear that the nature  of this co-operation  is unlikely to reduce  significantly  the cost of building 
Galileo  but  could  contribute  to  global  interoperability  and  potential  market  opportunities  and 
revenue streams. 

Initial  contacts  in  this  framework  have  been  made  with  the  Central  and  Eastern  European 
countries, Turkey, Switzerland, Iceland, countries in the CIS, Africa  and South America, as well 
as Canada, Australia, India, China  and Korea. For industrial,  strategic  and political reasons, as 
well  as  for  the  safe,  effective  and  efficient  transportation  of  goods  and  people,  it  is  vital  to 
promote Europe's GNSS approach with third countries, not least the candidates for accession, so 
that they are able to contribute to its success. Europe can then develop and export  a new global 
standard. 

3.5.  GNSS-2 Forum 

In order to fulfil  the March  1998 Council remit, the Commission  set up the GNSS-2  Forum12 
which  mobilised  most  of  the  relevant  European  actors  in  the  field  (over  the  period  July  to 
December  1998).  The  work  of  the  GNSS-2  Forum,  as  well  as  the  results  of  a  number  of 
studies,  and  in particular  the preliminary  findings  of the  ESA  GNSS-2  Comparative  System 
Studies, have contributed to shaping the opinion and recommendations of the Commission. 

The most  relevant  conclusions  of the Forum  suggest  that  the  future  GNSS  system  should  be 
based  on  a combination  of  GPS  and  a  global  European-led  component  (Galileo).  The  latter 
should  be  open  to  the  inclusion  of  complementary  contributions  from  third  countries  and 
organisations  (subject  to  industrial,  political,  military  and  security  considerations).  The 
analysis  of  the  different  criteria  for  GNSS-2  points  strongly  towards  the  need  to  develop  a 
system  that  can  provide  at  least  two  levels  of  service.  These  should  include  a basic  public 
service,  provided  free  of  charge  as  long  as  the  equivalent  US  GPS  service  is  free,  and  a 
service  designed  for  users  who  require  a  high  level  of  service  guarantees  (for  example  in 
terms  of  the  availability  and  integrity  of  the  signal).  The  development  of  a  public-private 
partnership  (PPP)  approach was  seen  as a priority:  the Forum  recommended  analysing  more 
concretely how best to  attract private investment.  It was felt  that the system  should be  global 
from the  start  in  order  to  allow  full  development  of the  global  market,  to  meet  the  needs  of 
global  industries  (e.g.  aviation  and  the  maritime  sectors;  financial  institutions  and  others 

12  The GNSS-2 Forum included leading  experts from  industry,  European institutions  and organisations, radio-
navigation  service  providers,  user  communities  and  academia  and  supported  the  development  of  the 
Commission's  thinking  on  institutional  and  legal  matters,  technical  and  financial  evaluation  of  different 
approaches,  civil/military  and  security  issues and  user  requirements.  The  Forum  met  in plenary  and  group 
sessions and produced a final report in December 1998. 

dependent  on precision  timing)  and because no partners were  identified  wishing  at this  stage 
to develop matching regional contributions. 

3.6.  The European  Parliament 

The  Commission  Communication  of January  1998 was  considered  by the  Parliament  which, 
on  the  basis  of  a  comprehensive  report,  adopted  a  Resolution  on  13  January  1999.  This 
recognised  that  European  industry  had  previously  suffered  from  a  lack  of  clear  political 
direction and commitment  in the space sector by the European institutions  and welcomed the 
Commission's paper, considering that a strategy had been needed  for years. Parliament  called 
on  the  Member  States  to  give  clear  decisions  at  Heads  of  State  or  Government  level  on 
strategic,  technical  and  budgetary  guidelines  and  on  the  timetable  for  GNSS-2.  It  equally 
asked  the  Commission  to  conduct  in-depth  negotiations  with  international  partners,  to  lead 
European  negotiations  in the  international  fora  for  satellite  orbital  positions  and  frequencies 
assignment  to  satellite  navigation  services  and  to  provide  a  regulatory  framework  for  the 
creation  of  an  internal  market  for  applications  of  European  space  technologies,  whilst 
stressing  that  GNSS  should,  as far  as possible, be  financed  through  models  of  private/public 
partnerships and user contributions. 

3.7.  Rejecting the 'Zero Option' 

All scenarios need to be compared with the zero option: a conscious  decision to abstain from 
having  a European presence in the core space segment of the future  GNSS. This would mean 
reliance on the US  GPS  system  and, potentially,  the Russian  Federation's  GLONASS  or any 
new system developed by other states. 

Clearly,  a  European  decision  to  concentrate  on  applications  and  augmentation  systems  and 
abstain from moving  into  satellite-based  navigation would be welcomed by the US  since this 
would  confirm  the  present  and  ensure  the  future  dominance  of  GPS.  Moreover,  European 
research  and  Trans-European  Network  money  might  be  concentrated  on  GPS  augmentation 
(including  through  systems  such  as  EGNOS)  and  developing  GPS-based  applications  in  the 
intelligent transport sector and in other domains. 

The  arguments  outlined  above  in  chapter  2  'The  Challenge  for  Europe'  speak  against  the 
abandonment  of  the  European  ambition  to  participate  in  the  control  of  the  space  segment. 
However,  it  is clear that public  spending  would have to be  carefully  estimated,  planned  and 
controlled  and that the private sector would have to take, where reasonable, part of the risk of 
developing  Galileo. Besides  looking  at technical  features  and  organisational  issues, the main 
thrust  of this  Communication  is therefore  to make  recommendations  to  ensure  that  Europe 
can afford to be present  in the future  Global Navigation Satellite  System. 

Conclusion:  The  'zero  option'  leaves  Europe  without  adequate  assurance  that  its 
political,  strategic,  economic,  employment,  industrial,  security,  space  and,  of  course, 
transport and other interests are preserved. 

Drawing  together  the  results  of  discussions  with  the  US  and  Russian  Federation,  the 
recommendations  of the GNSS-2 Forum and on the basis of the views of the Council and 
the  Parliament,  the  Commission  has  concluded  that  a  Galileo,  having  the  following 
characteristics, should be developed: 

-  It  would  be  independent  from  the  US  GPS,  but  complementary  to  it,  and 

interoperable with it. 

It would be open to other partners to participate. In particular, there could be major 
advantages  for  Europe  from  Russian  involvement,  if  this  can  be  established  on  a 
satisfactory basis. 

Within the constraints of interoperability with GPS, Galileo would exploit new, state-
of-the-art  capabilities in a civil system, allowing the development of new applications, 
making the  overall  GNSS  robust and  remedying  certain  shortcomings  of the  present 
GPS  (e.g.  poor  availability 
latitudes, 
unpredictable  temporary  gaps  in coverage,  including  over  the  European  continental 
landmass). 

in  urban  areas  and  the  northernmost 

It would  be  global  in coverage  from the  outset, to ensure  effective  independence  and 
to provide  a global  market for the system and its  applications.  Galileo would  include 
a restricted access service. 

4.  SYSTEM ARCHITECTURE AND TECHNICAL FEATURES 

This chapter considers which  architecture would be best  suited to meet  the demands of users 
in a cost-effective  manner. It represents the first outline of Galileo. 

4.1.  Performance  requirements 

For aviation and maritime users, there are already international performance  requirements  for 
navigation  systems. Essentially,  a world-wide requirement  of  10 metre horizontal accuracy is 
the minimum standard which Galileo would need to meet if it is to be accepted as an inherent 
component of a world-wide radio-navigation system13. 

Other  users  have  not  developed  similarly  precise  demands  which  have  the  backing  of 
regulation.  There  are  also  potential  users  whose  needs  have  not  been  defined,  although  the 
market potential has been  identified. 

The GNSS-2 Forum  identified  certain broad performance  requirements  for  Galileo, including 
that it would need to provide approximately equivalent performance  to the next generation of 
GPS (Block IIF) if it was to be regarded as a credible system14, that the space segment should 
not  attempt  to  provide  all  navigation  solutions15  and  that  additional  navigation-related 
communications capabilities on board the satellites would be useful. 

13 

14 

15 

Users can directly determine their navigation solution (three-dimensional position, velocity and time) in real 
time when receiving at least four signals from four different satellites, without referring to other systems.. 

This has been interpreted as meaning global landmass and coastal water coverage at not less than 9.1  metres 
horizontal and vertical accuracy, without local area augmentation, 95% of the time. Higher levels of service 
should be available from the system through integration with terrestrial augmentation. 

A  comprehensive navigation network  for  Europe, with  the  required  levels  of  robustness  and integrating 
satellite-based and appropriate terrestrial technologies, will be designed and proposed by the Commission as 
a European Radio-Navigation Plan, once decisions have been taken on the European involvement in GNSS. 

During  the project  definition  phase, the  input  of user  groups, potential  service providers  and 
public  authorities  will  be  vital.  Only  after  this  can  precise  mission  requirements  be  set  and 
final decisions made on the required terrestrial and space  infrastructure. 

The  aim  of  the  European  radio-navigation  strategy  must  be  to  meet  set  performance 
requirements  with  regard  to  security  and  safety  cost-effectively.  There  will  inevitably  be 
satellite-based  components and terrestrial elements, supporting overall system robustness. The 
indications  from  experts  and  accepted  by  the  Commission  in  defining  an  approach  to 
European involvement in GNSS are as follows. 

The definition  of the architecture  is based  on  achieving  global  coverage, providing  access to 
mass market applications, with a good basic level of safety  for European transport operations, 
but with  a minimum  space infrastructure  (allowing  for  augmentations  to be  developed  where 
required to meet more stringent safety demands or for dedicated commercial applications). 

There  are  four  types  of  orbit  for  navigation  satellites  which  could  provide  a  homogeneous 
signal in space for a global service area (cf. annex II a)16. 

The optimal  system definition  should take into account the different  strengths of the  different 
orbits to ensure performance  in line with safety requirements and user demands, including the 
provision  of  integrity  data.  Precise  recommendations  will  be  made  through  the  ESA 
comparative  study.  However,  at the present  stage, it  appears  clear  that  the  core  constellation 
for Europe is likely to be a Medium Earth Orbit (MEO), representing low technical risk and 
known performance  capabilities. 

The  MEO  approach  was  adopted  by  both  the  US  and  the  USSR  for  the  systems  they 
developed.  It has proved  very  efficient  and has been retained  for  later  generations  of the two 
systems,  including  GPS  Block  IIF  and  GLONASS  M.  This  option,  therefore,  represents 
minimal  technical  and  industrial  risk,  in particular  if Europe  and  the Russian  Federation  can 
build on each other's respective strengths and experience. 

The wide area augmentation  services being developed by the US, Japan and Europe (WAAS, 
MSAS  and EGNOS respectively) provide integrity  checks  and differential  correction17  to the 
GPS signals; EGNOS in addition similarly augments GLONASS. They also provide a ranging 
signal. 

To date, the work led by ESA and with the close involvement  of industry has focused  on two 
broad options: 

•  a  core  constellation  of  21  MEO,  which  would  come  close  to  meeting  European 
requirements.  Integration  of  GPS  and  local  area  augmentation  in  a total  system  approach 
could guarantee the European requirements, and 

16  GNSS-2 Forum Technical and Financial Group Report, December  1998 

17 

Integrity can be defined  as the level of confidence  given to users that the calculated position corresponds to 
the data provided -  it is based  on ensuring users are alerted to errors through  a warning  message  provided 
within  a specified  time; differential  correction means reducing  the main  sources  of positioning  error  which 
result from  the propagation of radio-waves through the ionosphere 

10 

•  a  core  36  MEO  constellation,  which  would  meet  European  requirements  fully  and 

independently. 

Users  will  require  real  time  information  on the health  of the  constellation  (i.e. certainty  that 
the  signals  are  correct).  The  integrity  message  might,  at  least  in  part,  be  delivered  from  the 
core MEO constellation but it is considered  at this stage that  a complement  of between  3 and 
9  GEO  and/or IGSO  satellites, which might  include  the  EGNOS  satellites,  will  be  needed18. 
The  optimal  integration  of  ground  networks,  including  those  developed  for  EGNOS  and,  if 
suitable  agreements  are reached,  GLONASS, is  also  foreseen.  The  Galileo  work  programme 
will also need to cover a strategy for the problem of space debris. 

While  this  is  only  a  preliminary  sketch  of  Galileo,  the  basic  decision  on  European 
involvement  in GNSS can already be taken since sufficient  details of constellation  parameters 
and  fairly  accurate  budgetary  implications  are  already  known.  In  addition  to  positioning, 
navigation  and 
limited  navigation-related 
communications  capabilities  on Galileo  could make  safety  critical  services more reliable  and 
generate revenue streams19. 

is  anticipated 

that  hosting 

timing, 

it 

4.2.  Security issues 

There are clear security requirements relating to the physical protection  of vital  infrastructure 
(such as control centres and communication  networks)  as well as with regard to the provision 
of accurate navigation  signals in times of tension or war. Further, protection  against  spoofing 
and  other  forms  of  misuse  and  interference  with  the  signal  in  space  needs  to  be  ensured. 
Conversely,  it must be possible to deny use of the system to enemy  forces  in a war  situation. 
The system design will need to take these  general requirements  into  account.  In  addition,  an 
interference  monitoring  structure  and  an  interface  with  the  military  will  need  to  be 
established.  The  Commission  intends  to have  further  exploratory  discussions  with  a view  to 
identifying  appropriate  partners  and  structures  for  this  interface,  in  accordance  with  the 
recommendations  of  the  study  carried  out  for  the  Commission20  and  in  the  light  of 
international  discussions  and negotiations, and will make proposals  as soon  as feasible  in the 
framework  of the Community common foreign and security policy. 

An  approach  favoured  by  experts  in  the  GNSS-2  Forum  was  to  develop  a  controlled  access 
service. They envisaged that there would be universal access to a basic signal for mass-market 
applications.  There  would  also  be  a  controlled  access  service,  using  a  second  signal,  with 
guaranteed  availability  and  accuracy.  It  could  also provide  users  with  liability  cover  in  case 
the  system  failed  to meet performances  specified.  The controlled  access  could  further  satisfy 

18 

19 

To be  confirmed  during  the  definition  phase  of  the  ESA  GNSS-2  comparative  study.  The  GNSS-2  Forum 
Technical  and Financial  Group  Report,  December  1998, identified  a  36 MEO  +  9  GEO  constellation  as a 
baseline  to  meet  user  requirements  (9.1  metres  horizontal  and  vertical  accuracy,  without  local  area 
augmentation, 95% of the time). 

The technical  and financial  group of the GNSS-2 Forum considered these  issues in depth. It was  concluded 
that the options of hosting navigation payloads on communications  satellites  (i.e.  'piggy-backing')  and vice 
versa were unrealistic. Limited navigation-related  communications  capability  could, by contrast, be  feasible 
and provide added value. 

20 

Civil-military interface  for GNSS, January  1999 

11 

international  commitments  such as for  safety-of-life  services. For  example,  search and rescue 
operations  could  depend  on  this  service  in  any  circumstances.  The  service  is  seen  as key  to 
attracting  private  sector  involvement  in  GALILEO  and  generating  revenue  streams. In  times 
of  serious  tension  or  conflict,  this  service  would,  however,  be  restricted  to  authorised 
categories of subscribers. 

All these  security  issues have  implications  for  system  design  and need  to be resolved  before 
the test  and validation  (tendering  and  construction) phases  of  GALILEO  can begin  (altering 
the design  and requiring  re-deployment  of  satellites  and modification  of the  ground  segment 
need  to  be  avoided).  Preliminary  costings  for  this  are  included  in  the  financial  section  5.1 
below. 

4.3.  Requirements of GNSS Ground Network 

The  function  of  the  GNSS  ground  segment  is  to  provide  integrity  monitoring,  orbit 
determination  and timing  synchronisation  and management  of overall  system  operation.  The 
ground  segment  for  EGNOS,  currently  being  implemented  as  part  of  the  Trans-European 
positioning and navigation network,  has been developed,  to the greatest possible extent, to be 
reusable  in  a  European  GNSS-2  constellation.  Additional  ground  stations  may  need  to  be 
deployed  outside  the  EU  to  guarantee  good  global  performance.  In  order  to  guarantee  the 
system  performance,  physical  security  requirements  must  be  taken  into  consideration. 
Examples  may  include  restricted  access  to  buildings,  dedicated  communications  networks, 
suitable power levels and encryption of ground - satellite links. 

In  addition  to  the  basic  Galileo  infrastructure,  including  the  related  ground  segment,  the 
potential will  exist to  enhance the performance  to  attain higher precision  and  other  dedicated 
services, in particular through use of appropriate terrestrial infrastructure.  Together, these will 
contribute  to  the  Trans-European  positioning  and  navigation  network,  providing  robustness, 
meeting  special  demands  from  particular  categories  of  user  in  defined  areas  and  providing 
service  where  satellite  technology  cannot  provide  a  cost-effective  solution.  In  essence,  the 
intention  of  the  proposed  European  involvement  in  GNSS  is  not  to  attempt  to  achieve  sole 
means of navigation  for all phases of navigation from  the basic satellite system alone. Rather, 
the GNSS  architecture must be  seen as a prime component  of the positioning  and  navigation 
networks and integrated for optimum cost-effective  use. 

4.4.  Signal structure 

The development  of a new satellite constellation, designed  for the twenty-first  century, allows 
Europe to consider improving present  signal structures to meet future  user demands. The GPS 
signal  is widely  recognised  by  users  as  a  satisfactory  structure  although  it  is not  guaranteed 
and  not  always  available.  A European  development  would  need,  from  the  mass-market  user 
point  of view, to deliver  a signal  compatible  and  interoperable  with  GPS. Used  together,  the 
modernised  GPS21  and  enhanced  European  signals  should  provide  a  better  service  than  is 

21  On  25  January  1999,  US  Vice  President  Gore  announced  a  new  GPS  modernisation  initiative  in  a 
programme  costing  $400 million.  This  involves  adding  two new  civil  signals  to  future  GPS  satellites. The 
initiative  is  seen  by  the  US  administration  as  part  of  an  on-going  public-private  effort.  The  second  civil 
signal  will  be  located  at  1227.60  MHz,  along  with  the  current  military  signal,  and  will  be  available  for 
general  use  in  non-safety-critical  applications.  A  third  civil  signal,  for  safety-of-life  applications,  will  be 
located at  1176.45 MHz, within the current aeronautical radio navigation  spectrum. 

12 

available from GPS alone. In order to optimise the European  signal  and reduce  susceptibility 
to jamming  and spoofing,  careful  selection of frequencies22 and transmission power will  also 
be required. While the subject is highly technical, the essence is that discussions are beginning 
with  the  US  and  with  European  industry  to  define  the  parameters  within  which  Europe  can 
develop  an  enhanced  signal  structure.  This  will  include  necessary  work  on  global 
standardisation of timing and geodetic references. 

Conclusion: Galileo should provide, as a minimum, three-dimensional  performance 
over  landmasses,  accurate  to  better  than  10  metres  horizontally,  providing  a 
universal independent time reference  on a global basis. A core MEO constellation  is 
considered  to  be  the  most  cost-effective  and  technically  proven  approach  for  the 
initial  deployment  and  provision  of  a  basic  service.  The  constellation  needs  to  be 
fully 
into  a  cohesive  Trans-European  positioning  and  navigation 
network.  A  good  level  of  security  and  a  controlled  access  signal  are  also  key 
features.  Adequate  long-term  spectrum  allocation  and  full  interoperability  and 
compatibility with GPS are critical. 

integrated 

5. 

FINANCIAL ASPECTS 

Given the present policy of the US to provide the basic GPS signal free of charge, it would be 
illusory  to  imagine  that  Galileo  could  be  developed  and provided  exclusively  by  the  private 
sector.  As  in  a number  of major  infrastructure  projects  in  the  context  of the  Trans-European 
Networks,  considerable  public  funding  will  need  to  be  found.  For  Galileo,  this  would  apply 
particularly  for  the  definition  and  test  and  validation  phases,  when  basic  research,  concept 
testing and development of the space segment would be carried out. 

This section of the paper sets out a three point financing plan: 

•  substantial  financing  at the European  level, through the EU Budget, notably  the  Transport 

TEN, and through ES A; 

•  establishment of revenue streams, which is likely to require regulatory action ; and 

•  developing  a public  private  partnership,  to  deliver  complementary  finance  and  value  for 

money. 

5.1.  Estimated costs 

The cost of the space segment and the required ground infrastructure  for a basic public  service 
will  depend  on  the  satellite  constellation.  There  is  still  a  range  of  options  to  be  evaluated 
before the optimum constellation to meet performance requirements can be defined.  However, 
it is already possible to give a fairly accurate indication of the potential cost of Galileo23. 

22  Subject  to agreements  with the Russian  Federation  and the US, Galileo  might  transmit  on two  of the  current 
GLONASS  frequencies  and  one  or  more  GPS  frequencies.  Use  of  frequencies  covered  by  the  European 
filings  in the ITU will also be  considered. 

23  The figures  are summarised  in Annex  III b. 

13 

Work  led by  ESA  and with  close  involvement  of industry  has  focused  on  costing  two  broad 
options (cf.  section 4.2) 24: 

•  a  36  MEO  and  9  GEO  constellation,  costing  around  €2.2  billion  over  the  period  1999-

2008, and 

•  a  21  MEO  and  3  GEO  constellation,  costing  €1.6  billion.  Integration  of  local  area 
augmentation25 in a total system approach could guarantee the European requirements. 

A  satisfactory  co-operation  agreement  with  the  US  might,  in  principle,  allow  both  sides  to 
consider reduced  satellite constellations which together would  guarantee  the levels of  service 
required  by  each  party.  Further,  co-operation  with  the  Russian  Federation  in  design  and 
implementation of Galileo could reduce costs. 

Estimates for the introduction of a controlled access service, together with security and  safety 
certification,  suggest  a  need  for  an  additional  budget  of  between  €600  million  and  €750 
million. 

Thus  the  total  cost  of  Galileo  over  the  period  1999-2008  is  currently  estimated  at  between 
€2.2  and 2.95  billion,  depending  on extent of joint  operation  with  GPS  and use  of terrestrial 
systems.  Not all of this needs to be public funding  if a PPP approach is adopted. 

Recurring  costs  (operations  and  replenishment  costs  corresponding  to  the  options  described 
above) amount to between €140  million and €205 million p.a., beginning  in 2008. However, 
some  cost  savings  should  be  possible  when  current  alternative  navigation  aids  can  be 
decommissioned. 

5.2.  Sources of public funding  for Galileo 

The case for  a public  contribution  to  Galileo has been made  above. In principle, it would  be 
possible  for  this  to  be  financed  from  national  budgets.  But  Galileo  is  a  key  part  of  the 
Transport  TENs26  and  the  Common  Transport  Policy  and  an  essentially  Trans-European 
project,  bringing  direct benefits  to all Member  States (helping  them meet  their public  service 
and  international  obligations  with  respect  to  providing  navigation  aids).  This  constitutes  a 
strong case for funding  at EU level. 

At the European level, a number of possible financial  sources can be  identified: 

•  First,  for  infrastructure  development  and  deployment,  the  Commission  has, in the  context 
of AGENDA  2000, proposed  some  €5.5  billion  for  the  Trans-European  Networks.  With 

24  N.B.  the  estimates  are based  on  the  assumption  that research  and  development,  deployment  of  the  ground 

segment and operational costs are constant for all options. 

25  Local  area augmentations  required  to meet performance  targets  for  Galileo  (reduced  constellation)  amount 

to an estimated €200 million (based on equipping 250 major  cities). 

26  GNSS  is  clearly  identified  as  a prime  element  of  the  positioning  and  navigation  network  and  a project  of 
common  interest  in  the  present  TEN-Transport  guidelines  (Decision  N°  1692/96/EC  of  the  European 
Parliament  and of the Council of 23 July  1996 on Community  guidelines  for  the development  of the trans-
European transport network; OJ. L 228 of 9 September  1996). 

14 

to  encourage  private 

the recent adoption of the common position on the revised TEN financial  regulation, multi-
annual  indicative  programming  should  soon  become  possible27.  This  should  create  the 
stable  environment  needed 
investment  and  support  market 
development.  The  Commission's  intention would  be to  propose  in  its  future  multi-annual 
programme  to  earmark  around  €500  million  (which  is  10%  of  the  budgetary  envelope 
proposed  for  the Trans-European  Transport Networks)  for  Galileo  and  to report  regularly 
to the Council  and the European  Parliament  on the progress  of the project.  This is in  line 
with  the  Commission's  objective  of  giving  greater  relative  priority  to  intelligent  transport 
systems. 

Second,  within  the  overall  budgetary  envelope  envisaged  for  the  5th  Framework 
Programme28,  the  Commission  considers  that  around  €120  million  could  reasonably  be 
found  for  Galileo. The lifetime  of the  5th Framework  Programme  is limited  to 2002, and a 
continuation  of  funding  beyond  2002  would  be  proposed,  subject  to  evaluation  of  the 5th 
Framework Programme. 

• 

Third,  for  co-operation  with  the  Russian  Federation  and  other  countries  of  the  former 
USSR, the Commission's TACIS programme offers  possibilities of support  in the fields  of 
training and conversion of industries from military to civil purposes. 

•  Fourth,  ESA  would,  in  the  context  of  its  institutional  mechanisms,  potentially  be  able  to 

mobilise funds of the same order as under the TENs. 

Thus,  in  total,  up  to  €1.25  billion  could  be  mobilised  on  the  European  level  for  a  Galileo 
programme  for the period  2000-06, compared  to a total cost  of €2.2  to 2.95  billion  spanning 
2000-08. On the level of the EU, this would not involve the creation of a new programme but 
would  be  done  by  earmarking  certain  sums  in  established  Community  programmes.  ESA 
would have to launch a new programme. 

On  the  basis  of  the  estimates  described  above,  a  further  sum  of  between  €950  million  and 
€1.70  billion  would  be  required  (before  taking  account  of  potential  EU  funding  in  2007-8 
which  is  outside  the  current  financing  period).  A  number  of  options  exist  to  mobilise  this 
additional money: 

•  First  and  foremost,  the  identification  of  potential  revenue  streams  could  attract  the 
involvement  of  the private  sector  in  Galileo. This  might  also  allow  the  EIB,  (and,  in  the 
case  of  a  Euro-Russian  co-operation,  the  EBRD),  to  finance  part  of  the  project  through 
long term loans; 

27  This should respond to the Opinion of the Parliament's Committee on Budgets that the lack of clear political 

direction and commitment from the European institutions had a detrimental  effect. 

28  Proposal  for  a  decision  of  the  European  Parliament  and  the  Council  covering  the  5th  Framework 
Programme  of the European  Union  for  research,  technical development  and demonstration  activities  (1998 
to 2002),  COM  (97)  142 final. Use  of the  expertise  of the Joint Research  Centres  (in particular,  the  Space 
Applications  Institute)  and  actions  under  the  thematic  programmes  'improving  the  quality  of  life  and  the 
management  of  living  resources'  and  'promoting  competitive  and  sustainable  growth'  as  well  as  the 
horizontal programme  'confirming  the international role of Community research' may be involved. 

15 

•  co-operation  with  other  countries  may  allow  sharing  of  costs  between  international 

partners; and 

•  a number  of Member  States may be  able to contribute  individually;  in particular  to  ensure 

that aspects of the European GNSS which are security related are adequately handled. 

5.3.  Potential revenue streams enabling public-private  partnership 

Revenue streams will reduce the need for public subsidy and facilitate PPPs.  Furthermore, the 
Parliament requested the Commission to investigate new and even unconventional methods to 
ensure that future users pay for GNSS services they receive29. The Commission has, therefore, 
considered a number of potential sources of revenue streams. 

•  First,  a possible  revenue  source relates  to  different  levels  of  service  (two  or more  signals 
from  the space segment, one generally available, and one or more offering  higher  levels of 
service  based  on  controlled  access).  Different  receivers  or  smart  cards  would  need  to  be 
developed for the different  levels of service: 

- 

level  1 

service to the mass market 

- 

level 2 

a certifiable  service 

- 

level 3 

safety of life and security-related  services. 

It  is  envisaged  that  level  1 services,  consistent  with  present  US  policy  on  the  equivalent 
standard positioning  service of GPS  and the Russian Federation's  civil  GLONASS  signal, 
would  be  available  free  of  charge.  Should  the  US  and/or  Russian  policy  on  charging 
change, the European position could be revised. 

Levels  2  and  3 would  be  controlled  access  services,  available  to  subscribers  in  return  for 
certain  fees.  In  some  cases,  the  use  of  these  services  might  be  mandatory,  such  as  in 
connection with  electronic  fee  collection  for  access to infrastructure  or monitoring  fishing 
activities, freight  and coach transport  and road safety  services. It may be noted that IMO is 
requiring  internationally-registered  ships to carry  GNSS  equipment  from  2000  and  GNSS 
is an integral part of the CNS/ATM concept adopted by ICAO30. 

Levels  2 and  3 could be made  even more  attractive  if liability  cover was provided  for  the 
services  subscribers  received.  This  would  in  a way  represent  a  form  of  insurance  which 
would  allow Galileo users to rely on  services in a way which they could not  do using  the 
basic  signal.  Similarly,  the  fact  that  level  2  and  3  services  could  be  certified  for  safety-
critical and similar high-performance  tasks (in a way that GPS could not) would  constitute 
a marketable  asset. Insofar  as Galileo  allows existing ground based air navigation  facilities 
to be replaced and provides a better and more reliable service to airlines, it can be expected 
that airlines will contribute to the revenue stream. 

29 

30 

Opinion on the Commission's Communication of 21 January  1998 by the Committee on Budgets. 

Communication, Navigation,  Surveillance/Air Traffic  Management 

16 

•  A  second  possibility  would  be  a  levy  on receivers  for  all  satellite-based  radio-navigation 
services.  This  would  need  to  be  introduced  throughout  the  EU  and  be  applicable  to  all 
receivers  sold  in  or  imported  into  the  EU.  The  advantage  of  this  levy  would  be  to  apply 
also  to  the  mass-market  (such  as  equipment  for  in-car-navigation,  leisure  activities,  etc) 
and would  therefore  also  cover  level  1 equipment.  This would be  entirely  in line with the 
general  Commission  philosophy  of  marginal  infrastructure  cost  charging  and  could  be 
limited  to  very  small  sums.  Issues  of  user  acceptability  would  have  to  be  dealt  with  by 
showing  a  combination  of  cost  saving,  and  improved  service  availability  particularly  in 
urban  areas.  Funds  received  could  contribute,  for  example,  to  the  cost  of  operating  and 
updating  the  system  once in place. Levies  are already  used  in  a large number  of  Member 
States  for  certain  products,  inter  alia,  for  recording  equipment,  photocopiers  and  video 
cassettes. Equally,  certain  services, such as public television broadcasting,  are also  funded 
through  mandatory  user  charges.  A  levy  of  €20  on  receivers  would  lead  to  receipts  of 
€140-205 million annually and could go a considerable way to filling the financing  gap for 
project  construction  and  development31.  It  would  also  be  conceivable  to  introduce,  but 
probably  more  difficult  to implement,  an annual  operating  license  fee  for  the reception  of 
satellite navigation signals. 

•  Equally,  the  private  sector  could  generate  revenue  through  wide-ranging  applications, 
facilitated  by  the  integration  of  communication  and  positioning,  including  dedicated 
navigation-related  commercial  and high accuracy  services  and integration  of  safety-related 
and  security-critical  payloads.  This  may  also  include  some  dedicated  communications 
payloads  on  some  satellites.  A  number  of these  functions  could  be  used  to  comply  with 
public  service  obligations  (such  as  search  and  rescue).  A  'shadow  toll  model'  may  be  a 
way  of  guaranteeing  revenue  streams  to  a  private  operator.  Clearly,  giving  Galileo 
additional  capabilities  to  support  such  services  will  have  costs  that  need  to  be  compared 
with the extra revenue generated. 

Annex  IV  gives  some  tentative  market  forecasts  for  Galileo,  which  indicate  the  broad 
prospects  for  revenue  from  the  sources  identified  in this  section.  A number  of these  revenue 
streams, such as introducing  levies and making certain uses of Galileo mandatory,  depend on 
regulatory  decisions;  others,  such  as  controlled  access  and  encryption,  depend  on  the 
definition  of the technical characteristics  of the system. Moreover,  a number of other possible 
revenue streams may only be identified  over time since the market  for  satellite-applications  is 
growing exponentially. Industry will, therefore, need to work further  on this, in the context of 
the  overall  financing  package,  while  the  public  sector  will  need  to  address  the  related 
regulatory decisions. 

5.4.  Establishing a public private partnership 

As  in  other  TEN  projects,  there  is  significant  scope  for  attracting  private  investment  to 
develop  parts  of  the  infrastructure,  provided  potential  revenue  streams  are  clearly  identified 
and there  is a clear  allocation  of risks, which  may  involve  Government  guarantees.  One  aim 
should  be  for  public  sector  funding  to  be  largely  replaced  by  private  funding  by  the 
operational phase. 

31  Assuming  that by 2010 around  50% of new cars  are equipped  with a GNSS-based positioning  device,  and 

with around  14 million car sales in Europe annually, a levy of €20  would raise €140 million per year. 

17 

A PPP  for  Galileo  could provide  complementary  finance,  improve project  design  and  ensure 
overall value for money. In particular, the need to encourage take-up of the service in order to 
generate  income  and  reach  profitability  would  provide  a  powerful  mechanism  for  ensuring 
users'  needs  are  given  central  importance,  while  a PPP  structure  will  help  keep  costs  under 
control since much of the risk of construction cost over-run would normally fall on the private 
sector.  It  would  also  reflect  the  fact  that  Galileo  combines  public  service  and  commercial 
aspects. 

A  PPP  is therefore  the recommended  approach.  Indeed,  this  would  be  fully  in  line  with  the 
priority  given  up  to  now  to  such  an  approach.  The  Commission  Communication  on PPPs32, 
which  was  broadly  endorsed  by  the  Council  and  the  Parliament,  sets  out  a  number  of 
important recommendations that are relevant for Galileo. These include: 

• 

• 

• 

• 

that  private  sector  involvement  should  begin  at  as  early  a  stage  as possible,  so  they  can 
participate in project design; 

that  the public  sector  should  seek,  as much  as possible, to  specify  project  requirements  in 
terms of outputs (service levels) rather than detailed technical  specifications; 

the  most  effective  structure  for  a  PPP  normally  involves  a  specially  created  vehicle 
company,  clearly  accountable  for project  delivery,  and with  the management  autonomy  to 
run an efficient  project; and 

that risk  should be allocated  according  to scope to control them. This would,  for  example, 
mean  that  the  private  sector  should  be  responsible  for  construction  cost  over-runs,  while 
the public sector would be responsible for cost increases caused by regulatory changes. 

These  general  principles  need  to  be  applied  in  a  way  that  takes  full  account  of  the  unique 
features  of  Galileo,  including  the public  service  component  (safety  of  life  services)  and  the 
security dimension. 

The ideal  approach would be to  set up  a full  PPP  as  soon  as possible.  This would  mean  the 
design-build-operate  model  but  a  significant  amount  of  further  work  will  be  required  in  the 
following  areas: 

•  more precise specification  of performance  requirements, based on users' needs; 

• 

• 

identifying  risks,  and  how  they  should  be  allocated,  so  that  private  sector  investors  can 
make a commercial judgement on the risk/reward ratio; 

identification  of  revenue  streams,  which  means  both  more  precise  assessment  of  overall 
market  potential  and  market  segments  likely  to  be  willing  to  pay  for  a  restricted  access 
service, and a commitment  from  the public sector to take the regulatory action necessary to 
secure these revenue streams (e.g. the levy). 

Each  of these  areas needs to be  explored  in co-operation  with the private  sector.  This  would 
be  a central  part  of  the  definition  phase  of the project,  which  is  described  more  fully  in  the 
next  section.  If this  ambitious  approach  does not prove  viable  in  good  time  (for  example,  if 

32  COM (97) 453 final of  10 September  1997 

18 

the public  sector is unwilling to put revenue streams in place), a more traditional model  (with 
a  Programme  Development  Office  running  the  project  through  conventional  public  works 
contracts)  would  be  a possible  fallback  for  the  initial  stages.  The  Programme  Development 
Office  would  be  disbanded  once  the  vehicle  company  was  in  place  for  the  deployment  and 
operational phases. It should be noted that, while the Commission is promoting the setting up 
of a PPP  and a vehicle company, it would not engage itself in commercial business  activities 
(these are not provided for in the Treaty). 

Conclusion: As long  as the US continues  to provide the basic  GPS signal  free  of charge, 
public money will be needed to allow Galileo to be developed  and provide  a similar,  free 
basic  public  service.  However,  a  number  of  potential  revenue  streams  have  been 
identified,  some  of  which  depend  on  public  regulatory  action.  The  Commission  will 
investigate,  together  with  ESA  and  the  EIB,  the  potential  for  setting  up  a  vehicle 
company  already  in  the  initial  phase  of  the project.  If  this  is  not  immediately  possible, 
because of lacking public commitment to ensure the necessary framework  conditions  for 
revenue  streams,  a two  stage  approach  would  be proposed:  the first,  preparatory,  stage 
would  depend  essentially  on  public  financing  (TEN,  Community  Research  Framework 
programmes,  ESA  and  possibly  national  contributions)  disbursed  through  a  Project 
Development Office  (risk would be shared through a tightly controlled cost contract with 
industry);  the  second,  implementation,  stage would  imply  much  higher  investment  and 
commercial risk for the private sector. 

6.  ORGANISATIONAL  FRAMEWORK 

6.1.  Designing,  building  and  operating  Galileo:  basic  principles  and  immediate 

decisions 

The  Commission's  Communication  of  January  1998  summarised  the  roles  and 
responsibilities  which  should  be  included  in  a  GNSS  organisational  framework.  The 
GNSS-2  Forum  has  further  refined  the  work  on  these  questions.  Bearing  in  mind  the 
Community  approach  of  separation  of  regulatory  and  operational  functions  and  the 
intention to build as much as possible on existing bodies and structures, the  Commission 
is  proposing  the  following  preliminary  conclusions  (Annex  I)  sets  out,  in  schematic 
form,  the  stages  of project  development,  which  are referred  to  in the  remainder  of  this 
section). 

It  is,  in  this  context,  important  to  note  that,  for  a  number  of  questions,  no  immediate 
answers need to be given. 

•  With  the  decision  to  go  ahead  with  the  Galileo  programme,  the  only  firm 
commitment  that  needs  to  be  taken  is  to  set  up  the  appropriate  structures  for  the 
definition phase (i.e. up to December 2000). 

At  the  same  time,  the  organisation  of  the  remaining  phases  needs  to  be  prepared. 
Here,  the  Commission's  clear  intention  is  to  promote  a  PPP  and  to  undertake 
everything,  including  regulatory  proposals,  to  make  this  possible,  ideally  from  the 
beginning of the development  stage, but in any case before the deployment phase. 

One of the immediate  actions necessary  is to  ensure that  appropriate  frequencies  are 
available. 

19 

6.2.  Strategic Aspects 

The overall aim is to ensure that  a robust structure is in place to take strategic decisions, 
oversee international  negotiations,  and control  compliance  of Galileo  with  international, 
Community  and national regulations  and policies. It is proposed that the EU  institutional 
framework  be used for this purpose, with the Commission providing the necessary  input 
to  the  other  institutions.  This  is  a pragmatic  choice:  given  the  wide  range  of  sensitive 
political,  international,  economic,  industrial  and  security  issues  that  will  need  to  be 
balanced, only the EU institutional  structures  (and not exclusively the first  pillar)  appear 
suitable. 

The  Commission  (in  certain  cases,  together  with  the  Member  States)  should  represent 
EU interests  at the international  level on the basis, where  appropriate,  of mandates from 
the  Council.  This  might 
include  negotiating  global  standards  and  ensuring 
interoperability  and  compatibility  between  different  global  and  regional  systems.  This 
might then mean taking a central role in discussions on GNSS  signal  structures, a global 
methodology  to  achieve  certification,  a global  liability  regime,  and  in  ensuring  a global 
integrity monitoring network33. 

The GNSS High Level Group34 has proved useful  over the last years  and would have an 
important  role  in  steering  the  Galileo  programme:  i.e.  giving  overall  direction  to  the 
programme, developing  and monitoring the application  of a European  Radio-Navigation 
Plan35 and ensuring that strategic considerations, including those related to security36, are 
kept  in  view.  This  might  include  policy  on  the  Galileo  controlled  access  service.  The 
Commission  would  ensure  that  an  appropriate  consultation  platform  exists  for  users  so 
that policy recommendations reflect user demands37. 

6.3.  The development phase 

In  order  to  ensure  tight  control  on  costs  and  effective  use  of  public  resources, 
considerable  attention  needs  to  be  given  to  project  management.  A  sound  and  stable 
structure needs to be established, identifying  specific roles and responsibilities. 

33  For  cost-efficiency,  the  ground  network  under  definition  for  EGNOS  should  be  integrated  with  Europe's 
needs  for  GNSS-2.  Further,  appropriate  political  choices  of  location  of  infrastructure  are  important.  It is, 
therefore,  proposed  that  the  Commission  includes  this  aspect  in  its  discussions  with  third  countries  (cf. 
paragraph 2.4). 

34  The High Level Group was  set up under  Council Resolution  94/C 379/02 of  19 December  1994; OJ C 379 

of 31 December  1994. 

35  Providing  expert  input  on  the  development  of  an  appropriate  network  of  terrestrial  and  satellite-based 
systems,  fully  taking  into  account  the  capabilities  of different  components  and  the  need  for  safe  and  cost-
efficient  transition in accordance with Article  17 of the Trans-European Network Guidelines. 

36  cf.  GNSS-2 Forum, working group 3, report on security issues. 

37 

It is envisaged  that the user group established under the Commission's  GNSS-2 Forum should develop  into 
a permanent users'  forum 

20 

One important  element  of this would be to  examine the possibility  of the  EU  and  ESA, 
together  with  any  other  contributors,  pooling  financial  resources  (c.f.  annex  I).  The 
purpose  of  this  would  be  to  ensure  that  Galileo  is  run  from  the  outset  as  a  single 
integrated project. Advice on this will be sought from the EIB. 

A programme  management  board, consisting  of  the  Commission,  ESA,  national  space 
agencies  and  other  investors,  would  need  to  be  set  up,  to  put  in  place  the  vehicle 
company through public tender;  in the period before  the vehicle company  is in place, it 
would approve choices of contractors and monitor  compliance with contracts. 

The  overall  execution  of  the  project  would  be  managed  and  carried  out  by  a  vehicle 
company which  might  include  the primary  industrial  contractors  of  the  Galileo  project. 
This would  act  in  accordance  with  a contract  (possibly  to  design,  build  and  operate  the 
system)  a  key  element  of  which  would  be  the  financial  provisions  relating  to  public 
subsidy and availability of revenue streams. It would, in principle, be responsible for any 
cost overruns. 

In  the  definition  phase,  before  the  vehicle  company  is  set  up,  the  programme 
management board would need technical support. Since this stage is imminent, this could 
be provided by a technical task force, which might consist of experts from  ESA, national 
space  agencies,  the  Commission,  potential  service  providers  and,  as  required,  other 
organisations. 

If it is not possible to set up the vehicle company in time to manage the subsequent phase 
(i.e.  development)  of the project,  the technical  task  force  would  need  to  be  given  more 
formal  status,  perhaps  as  Programme  Development  Office.  Its  role  would  be  to  co 
ordinate  planning  and  development  of  the  space  and  ground  infrastructure.  The  office 
would  need  to  ensure  that  user  demands  and  requirements  for  development  of 
applications,  as  well  as  the  possibilities  for  integration  with  local  area  systems  and 
GNSS-1 infrastructure,  are important  service  drivers  and  are  fully  taken  into  account  in 
the Galileo project. 

The Programme Development  Office  would be disbanded once the vehicle company was 
in place. 

6.4.  The Operation phase 

6.4.1.  Galileo management 

To  manage  the  operation  of  Galileo,  the  Commission  would  propose  a  small  public 
structure  in  the  form  of  a  Galileo  Administration.  This  would,  in  essence,  be  the 
successor  of the Programme  Management  Board, responsible  for  ensuring the  operation 
of Galileo, while contracting out actual operations. This would have to be established by 
Council decision as it would need to have legal personality  in order to deal, for example, 
with  liability  issues.  Such  a  permanent  structure  should  boost  public  confidence  and 
encourage  industry  to  develop  applications  (so  facilitating  private  investment  and 
revenue streams). 

21 

While  the  size  of  the  Administration  and  the  tasks  to  be  carried  out  are  not  yet  fully 
defined  for  Galileo, the equivalent  structure should be in operation, initially for EGNOS, 
by the end of the year 200038. 

Tasks  which  might  be  assigned  could  include  liaison  with  the  different  international 
organisations39  involved  in GNSS  exploitation.  It might  also have  a role  in  establishing 
an  international  integrity  monitoring  network  and  establishing  appropriate  relationships 
with providers of specific  augmentation services, such as in the northernmost  latitudes. It 
could  also  accept  responsibility  for  peacetime  co-ordination  and  liaison,  as  appropriate, 
with defence  and security organisations, including NATO  and the WEU, the  Conference 
on  Security  and  Co-operation  in  Europe,  Interpol  and  Europol,  and  ensure  respect  of 
arrangements related to nuclear missile and non-proliferation  regimes. In practice, its role 
would  then  involve  management  of  encryption  related  to  the  controlled  access  service 
and  the  definition  of  responses  to  possible  security  incidents,  including  real  time 
dissemination  of  information  related  to  interference.  With  respect  to  liability,  the 
Administration would be responsible for dealing with any claim relating to Galileo. 

6.4.2.  Galileo operation 

The Commission  considers that the private  sector could, by way of concession,  perform 
the  main  functions  of  a  Galileo  operator.  If  the  approach  to  establish  a PPP  to  design, 
build and operate the system is accepted, this function  would be carried out by the same 
vehicle  company  responsible  for  putting  the  system  in  place.  The  vehicle  company 
would then have responsibility  for running the system  on a sound economic basis40, and 
integrating  new  technology,  where  appropriate,  to  improve  services  and  adapt  to  new 
user  demands.  It would  also  be  possible  to  contract  out  operation  of  the  system  to  the 
private sector even if earlier stages do not involve a PPP. 

6.5. 

Securing Radio Spectrum 

Securing  radio  spectrum  availability  is  a  pre-condition  to  implementing  Galileo  and 
ensuring its interference-free  operation. 

allocation  decisions 

at  World 
Frequency 
Radiocommunications  Conferences  (WRCs),  organised  under  the  auspices  of  the 
International Telecommunication Union (ITU) with its  186 Member Countries. European 
positions  for  WRCs  are  developed  and  negotiated  within  the  framework  of  the  CEPT 
(European  Conference  of  Postal  and  Telecommunications  Administrations)  which 

the  global 

taken 

level 

are 

at 

38 

39 

40 

If  this  time  scale  is  not  possible,  the  EGNOS  Operations  and  Infrastructure  Group  currently  being 
established  should be  able to assume the management  responsibilities  for  EGNOS. In the  case  of EGNOS, 
however, there is currently no plan for a vehicle company to operate the system, so the  EGNOS  equivalent 
of the Galileo  Administration would have a wider role. 

It  might  thus  benefit  from  the  wider  membership  and  ties  of  these  organisations  under  international 
agreements. 

Charging  policy  might  be  subject  to  approval  by  the  Galileo  Administration  on  the  basis  of  Community 
guidelines and regulatory acts; fee collection would be the responsibility of the operator under  concession. 

22 

comprises  43  European  countries  and  therefore  potentially  leads  to  harmonised 
frequency  allocations beyond the Community borders41. 

It is essential to develop  a common European position  so as to ensure that the  frequency 
requirements  for  GNSS and Galileo  are recognised  and met within ITU/WRC as well as 
in the framework  of the CEPT. As described in the recent Green Paper42, there are wide-
ranging  and  increasingly  conflicting  interests  and  a  large  number  of  actors  involved  in 
the preparation  for  the WRCs. The  Commission  would  therefore  recommend  that,  with 
regard  to  CEPT,  consideration  be  given  to  reaching  political  and  legal  agreement 
through  European  Parliament  and  Council  Decisions.  This  would  follow  the  precedent 
set  in  the  case  of  the  harmonised  introduction  of  mobile  and  satellite  personal 
communications systems in the Community43. 

Further, especially as CEPT is in a minority within ITU, education and awareness actions 
will  play  a vital  role  in  securing  the  frequencies  that  will  permit  Galileo  to  come  into 
service,  as  well  as  in  generating  the  potential  market  for  Galileo.  Alliances  with  like-
minded countries and blocks should thus be sought for the WRCs. 

As  the  US  is  also  particularly  concerned  about  protection  of  present  radio-navigation 
satellite  frequencies  (GPS  and  GLONASS)  in  view  of  the  forthcoming  discussions  at 
WRC  200044,  there  is  an  opportunity  for  co-operation  and  agreement  which  should  be 
taken  into  account  in  establishing  a  mandate  for  international  GNSS  negotiations.  In 
advance  of  this,  early  technical  discussions  with  the  US  may  be  critical  to  defining  a 
jointly  acceptable  approach  and  protecting  European  industry's  opportunities  in  GNSS 
with  new  equipment  and  service  design.  Similar  considerations  apply  with  the  Russian 
Federation, especially if Galileo is built jointly, using the GLONASS frequency  band. 

41 

42 

43 

44 

The Community has the status of observer within ITU/WRC and counsellor to CEPT, providing  information 
on the Community policies and their spectrum requirements. See further  information  in the  Communication 
from  the  Commission  to  the  European  Parliament  and  Council  on  the  World  Radiocommunications 
Conference  1997  (WRC-97),  COM  (97)  304  final,  18  June  1997,  and  Communication  from  the 
Commission  to the European Parliament  and the  Council  on radio  frequency  requirements  for  Community 
policies  in  the  context  of  the  World  Radiocommunications  Conference  1999  (WRC-1999),  COM  (1998) 
298 final, 13 May  1998. 

Green  Paper  on  Radio  Spectrum  Policy  in  the  context  of  European  Community  policies  such  as 
telecommunications, broadcasting, transport and R&D; COM (1998) 596 final, 9 December  1998 

Decision N° 710/97/EC  of the  European  Parliament  and  Council Decision  on  a  co-ordinated  authorisation 
approach in the field  of satellite personal-communication  services  in the Community,  OJ L  105/4, 23 April 
1997. Decision N°  .../98/EC  of the European Parliament  and Council on the co-ordinated  introduction  of a 
third  generation  mobile  and  wireless  communication  system  (UMTS)  in  the  Community.  Under  these 
Decisions, CEPT is mandated to harmonise  frequencies  and authorisation conditions for UMTS and  S-PCS; 
where work by  CEPT or the implementation by the Member  States is not  satisfactory,  further  action  at the 
Community level shall be taken. 

The  next  WRC  will be  held  in  Istanbul  between  8 May  and  2  June  2000  (WRC-2000).  One  item  on  the 
agenda  is  allocation  of  spectrum  for  GNSS  and  other  radio-navigation  satellite  services.  CEPT  has 
provisionally accepted the need to protect the current spectrum for radio-navigation  satellite services. 

23 

6.6.  Regulatory  Co-ordinator 

Generally,  international  law  provides  a  framework  for  regulation  of  critical  activities 
(e.g.  relating  to  safety,  industrial  standards,  environment  and  implementation  of  public 
policy)  which  is  implemented  in  more  detailed  national  legislation.  For  navigation,  a 
regulator  is  necessary  to  ensure  that  systems  and  related  services  meet  the  legal 
performance  requirements  set, most notably for  safety.  At this stage, decisions on GNSS 
navigation,  positioning  and  timing  regulation  clearly  remain  at  national  level  or  within 
the  Community  and  international  entities which  are under  definition  (e.g.  EASA45)  and 
regulatory  audit  conclusions  will  need  to  be  referred  to  the  national  regulators  for 
approval. 

Consideration  needs to be  given  to whether there  is a need, beyond  the  already  existing 
co-ordination  function  that the Commission has, to  set up  a European  GNSS  Regulatory 
Co-ordinator, taking responsibility  for the development  of standards, where required  (for 
example  for  certification  or  type  approval),  for  Galileo  and  other  parts  of  the  Trans-
European  Positioning  and  Navigation  Network46.  In  some  cases,  this  may  require  the 
creation of new centres of expertise to develop standards47; in others, existing bodies will 
be  able  to  support  the  work.  The  standards  developed  could  then  be  incorporated  into 
regulation  by  the  appropriate  bodies  (e.g.  ICAO,  IMO,  ISO,  CENELEC,  IEC, 
EUROCONTROL  and  ETSI).  The  Regulatory  Co-ordinator  will  also  be  able  to  offer 
system  performance  monitoring  so  that  Member  States  can  be  assured  that  their 
obligations are satisfied.  This structure would also have an important role to promote the 
introduction  of harmonised regulatory performance  requirements  across transport  modes 
and between user groups. 

The role of regulatory co-ordination can, at this stage, be performed  by a specialist  group 
of national  experts  nominated  by  the  Member  States, with  the  support  of  observers,  as 
required,  from  other  organisations  and  disciplines  (e.g.  national  regulators;  relevant 
international  and  Community  regulatory  entities;  European  standardisation  bodies; 
agriculture,  Customs  and  fisheries  authorities;  security-related  activities  organisations 
and third countries). It will monitor the work of the Programme Management Board. 

A  future  Regulatory  Co-ordinator  might,  at  a  later  stage  and  particularly  when  the 
Galileo  Administration  becomes  established  and  needs  regulatory  support,  be 
empowered  to develop mandatory  standards to be implemented  by all Member  States to 

45  Draft  recommendation  for a Council Decision authorising the Commission  to start negotiations  with a view 
to  establish  a European  Organisation  responsible  for  civil  aviation  safety,  SEC  2152,  16 December  1996. 
While  it  is noted  that,  in  the  field  of  civil  aviation  and  safety  regulation,  the  emerging  European  Aviation 
Safety  Authority (EASA)  is mode-specific,  input from EASA will be an important element in the  definition 
of the GNSS safety policy. 

46 

Including  wide  and  local  area  augmentations  making  use  of  the  satellite-based  infrastructure  (e.g. 
differential  systems, such as DGPS, DGLONASS and  Eurofix) 

47  This conclusion was drawn in a study carried out on behalf of the Commission and entitled 'Study to Devise 
a  Legal/Certification  Framework  for  a  Satellite-Based  Navigation  and  Positioning  Service  (CLAIM 
GNSS),' September  1998. 

24 

satisfy  the objectives  of the Trans-European  Positioning  and Navigation  Network.  This 
would need to be set up in a way that does not conflict  with the Treaty. 

Conclusion: the following  organisational structure is proposed: 

For  strategic  decisions  to  be  taken  at  EU  level,  with  the  Commission  taking  its  usual 
role, supported by the GNSS High Level Group. 

during  the preparatory  and implementation  phase 

through  a  Programme 
an  appropriate  programme  management  structure 
Management  Board  supported  initially by  a technical  task  force,  and  subsequently 
granting a concession to a Vehicle company; 

in the operations phase, 

a  small  GALILEO  Administration,  working  with  the  vehicle  company  to  manage 
the  provision  of  satellite-based  navigation  services  and  guarantee  performance,  as 
well as ensuring peacetime defence and security  co-ordination 

for regulatory issues 

a  GNSS  Regulatory  Co-ordinator  to  develop  mandatory  standards  to  be 
implemented  by  all Member  States to satisfy  the objectives  of the  Trans-European 
Positioning and Navigation  Network. 

7. 

THE  FEASIBILITY  OF,  AND  POSSIBLE  PARTNERS  FOR,  A  JOINT  DEVELOPMENT  OF  A 

SYSTEM:  CONCLUDING AGREEMENTS 

Negotiations  will  be  necessary  in  order  to  conclude  agreements  with  international  partners, 
including  potentially  those  hosting  terrestrial  infrastructures.  The  Commission  will  propose 
negotiating  guidelines  in  each  case,  tailoring  the  content  and  scope  to  the  nature  of  the  co 
operation  envisaged with the different  countries (industrial, political  and security issues). The 
aim  will  be  to  ensure  that  Europe's  interests  are  safeguarded  in  the  international  field,  as 
requested by the Parliament in its January  1999 Resolution. 

In  the  immediate  future,  only  two  decisions  -  to  open  negotiations  with  the  US  and  the 
Russian  Federation  -  will  be  sought  from  the  Council.  Further  technical  discussions  will 
continue  to  take  place  whilst  the  Council  is  considering  the  proposed  recommendations  for 
decisions  and  the  negotiating  guidelines.  With  other  countries,  such  as  Japan,  further 
exploratory talks are necessary. 

As  to  the  US,  the  Commission  will  propose  to  the  Council  to  open  negotiations  on  the 
assumption that Europe will develop a global constellation fully  compatible with GPS. Europe 
should  seek  maximum  involvement  in  the  GPS  modernisation  programme  (including  the 
evolution  of  the  signal  structure)  and  the  future  development  of  a  global  integrity  network. 
Equally,  an agreement  with the US would need to contain provisions  for  an appropriate joint 
management  board  responsible  for  co-ordination  of  policy  and  technical  issues  (signal 
structure, integrity networking, etc). The negotiation would also need to consider development 

25 

of a dispute  settlement mechanism  and any further  requirements which may  emerge  from  the 
ESA  comparative  study.  The  US  has  also  made  it  clear  that  they  could  consider  increasing 
European  insight  and  input  into  the  operation  and  management  of  GPS  civil  functions  (e.g. 
through  civilian  representation  at  the  civil  GPS  augmentation  centres);  reciprocally, 
equivalent treatment of the US within Galileo would be expected. 

With  the  Russian  Federation,  the  Commission  will  propose  to  the  Council  to  open 
negotiations  on  an  agreement  with  a  view  to  developing  a joint  Euro-Russian  Galileo.  The 
agreement  would need to reflect  the gradualist  approach  set  out  in  section  3.2  above. On the 
scenario  of joint  development,  there  would  need  to  be  provision  for  the  creation  of  a joint 
steering  committee  to  approve  development  of  an  appropriate  signal  structure  and  co 
ordination  of  policy  and  technical  issues,  including  co-ordinated  infrastructure  planning  to 
ensure  cost-effective  transition  and  deployment  of  the  future  positioning  and  navigation 
networks. Respective rights and obligations under a joint development programme would also 
need  to  be  agreed  in  detail,  including  dispute  settlement  procedures  and  authorised 
interlocutors48. Security concerns would need to be addressed. 

The  scope  of  co-operation  with  the Russian  Federation  will  have  important  implications  for 
other  aspects  of  project  development,  notably  financing  and  organisational  structures,  and 
negotiations  will  need  to  clarify  what  is realistic  in  good  time  for  the necessary  decisions  in 
these areas. 

8. 

THE WAY FORWARD  :  IMPLEMENTING THE STRATEGY 

In  line  with  the  conclusions  of  the  above  sections,  the  following  scheme  to  develop  a 
European  GNSS-2  constellation  (Galileo)  is  recommended.  It  is  envisaged  that  the  EU 
Council  of  Ministers,  and  perhaps  the  European  Council,  will  take  decisions  on  the  main 
issues by the end of June. The European Parliament also has a crucial role to play.  Within this 
framework,  the meeting  of  the  ESA  Council  in May  should  provide  clarification  of  the  role 
ESA can play in the technical, financial  and organisational development of Galileo. 

The  decisions  should  cover  the  whole  period,  including  the  operations  phase.  However,  a 
major  milestone will be reached by the end of 2000 when it will be possible  to review  these 
orientations. 

•  setting the strategy in motion 

A  decision  is needed  now  that  Europe will  develop  Galileo,  in  order  to  provide the  political 
commitment  necessary  for  industry  to  invest,  to  allow  Europe  to negotiate  the parameters  of 
the  system  with  its  international  partners  and  to  ensure  that  Europe  is  able  to  exert  an 
influence  in the development of this strategic market. This commitment could take the form of 
a  European  Council  orientation  to  treat  Galileo  as  a  key  TENs  priority,  in  line  with  the 

48 

It  will  be  important  that  Europe  is  fully  aware  of  the  various  responsibilities  of  its  Russian  partners, 
including 
industry,  the  Russian  Space  Agency  and  the  Ministry  of  Defence.  The  development  of 
Internavigatsia  as an industrial-financial  consortium,  responsible  under  its charter,  inter  alia,  for  developing 
the use of GLONASS  for  civil users  (per decision  of the Government  of the Russian  Federation,  N°  1435 of 
15  November  1997)  and  developing  navigation  systems  within  the  framework  of  the  European  GNSS 
programmes,  may provide  helpful  focus  and  coordination. 

26 

recommendation  of  the  European  Parliament.  This  political  commitment  will  need  to  be 
translated into a number of specific  decisions set out below. 

The main features  of the recommended Galileo are: 

• 

• 

it  must  be  an  open,  global  system,  fully  compatible  with  GPS,  but  independent  from  it, 
with a significant  role for the Russian Federation; 

it should be based on medium Earth orbit  (MEO) satellites, and would  include a restricted 
access  service.  But  decisions  now  should  not  restrict  the  scope  to  adapt  design  to 
technological progress; 

• 

it should be developed as a public private partnership, with significant  funding  at European 
level (EU and ESA), and development of new revenue streams. 

•  financing  Galileo 

This Communication  has identified  the potential cost of Galileo  and the options  for  financing 
it,  on  the basis  that,  with  the  GPS  signal  currently  available  free,  significant  public  finance 
will be needed. It is not necessary  or possible, now, to make final  decisions on the exact  split 
between different  sources of finance, but endorsement is sought for  each of the aspects of the 
financing  approach. 

First, a significant  allocation of EU funding  now will give the project  a solid foundation.  This 
requires a number of specific  decisions: 

-  appropriate funding  for TEN-T in Agenda 2000 on the basis of the  Commission 

proposal and the Parliament's opinion 

-  adoption  of  the  revised  TEN  financial  regulation  with  provision  for  multi-
annual programming  and the possibility to go up to 20% funding  for projects  of 
European interest, such as Galileo 

-  Council and Parliament endorsement of the proposed allocation of €500  million 

for Galileo in the transport TEN multi-annual  programme 

-  Council and Parliament recommendation to the Commission to facilitate the use 
of 5th Framework Programme resources of around €120 million for the Galileo 
development 

Second, on revenue streams: 

-  a  decision  is  needed  on  whether  to  pursue  the  option  of  a  levy  on  receivers, 

which could make a significant  contribution to financing  the project. 

-  other  revenue  streams  are reliant  on the  extent  to  which  specialised  users  will 
pay  for  a  better  quality,  guaranteed  or  certified  service.  The  Commission  is 
setting  up  a  Special  Task  Force,  led  by  the  private  sector,  to  carry  out  the 
substantial  further  work needed  to  look  into  this.  Once revenue  streams  which 
would  allow  the  establishment  of  a PPP  and  needs  for  regulatory  action  have 
been  identified,  the  Commission  could  be  mandated  to  develop  appropriate 
proposals. 

27 

Third: 

-  endorsement of a PPP approach. As well as helping to improve value for money 
and giving users' needs a central role, this will be a clear signal that the private 
sector  should  confirm  its  own  commitment  to  the  project  by  investing  risk 
capital  in it.  Setting up a PPP will require  a significant  amount  of further  work 
on  performance  requirements,  risk  allocation  and  revenue  streams,  which 
should be a priority for the definition phase. 

•  managing the development of Galileo 

The definitive  organisational structure does not need to be decided now. The first priority is to 
make clear arrangements for the definition phase (June  1999 to December 2000). This means: 

-  confirming  that  the  key  strategic  decisions  should  be  taken  in  the  EU 
institutional  framework  (and  not  solely  the  first  pillar),  with  the  GNSS  High 
Level  Group  to  support  the  Commission  by  giving  strategic  orientations  and 
accompanying  the  development  of  the  Galileo  programme,  including  the 
international discussions and negotiations 

-  putting in place a Programme Management  Board, chaired by the  Commission, 
to  develop  an  appropriate  programme  management  structure  (involving  a 
vehicle  company),  to  co-ordinate  research  and  development  for  Galileo,  to 
finalise performance requirements and to establish, on the basis of private sector 
input,  a  business  case  for  the  public  private  partnership.  This  would  be 
supported by  a technical task  force  in the definition  phase.  On the basis of the 
work  of  the  Project  Management  Board,  the  Commission  would  make 
recommendations  to  the  Council  and  Parliament,  at  the  end  of  the  definition 
stage, allowing firm decisions on programme structure and  financing 

As  far  as  the  long-term  organisational  structure  is  concerned,  the  Commission  envisages  a 
Galileo  Administration  in  the  operations  phase  to  manage  (through  the  vehicle  company) 
provision of satellite-based navigation services and guarantee these services and  performance. 
The  Commission  will  also  need  to  develop  further  the  concept  of  regulatory  co-ordination, 
based on existing regulatory  structures 

•  establishing the international environment 

There is a need to go beyond the exploratory stage in discussions with the US and the Russian 
Federation.  Key  decisions  in  the  definition  phase  depend  on  the nature  of  the  commitments 
our partners  are willing to make. The Commission intends to  submit,  as soon  as possible, the 
negotiating guidelines foreshadowed  in this Communication for endorsement by the Council. 

Exploratory  discussions with  other countries will  also need  to take place, to  assess the  scope 
for their practical involvement in Galileo. 

28 

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Annex II a):  Main Characteristics of Orbits Considered for Galileo 

Several different  scenarios could be envisaged  for the Galileo  space segment. The choice 
of  orbit  or  the  combination  of  orbits  results  from  a  compromise  between  different 
parameters, such as number of satellites, coverage, cost, ground segment required, etc. 

LEO (Low Earth Orbit) 

The LEO  approach  (up  to  2000 km)  has previously  been  chosen  for  numerous  personal 
telecommunications  constellations,  including  Globalstar  and  Iridium,  as  well  as  for  the 
Transit  system  for  navigation.  Its main  advantages  come  from  the  low  cost  of receivers 
and satellite payloads. However, the orbital period is 45-90 minutes, with each satellite in 
view only  for  a short period  (approximately  15 minutes). A  large number  of  satellites  is 
therefore  required. 

MEO (Medium Earth Orbit) 

The  MEO  approach  (between  5000  and  20,000  km)  was  selected  for  GPS  and 
GLONASS. Both  operate  in  circular  orbits  around  20,000  km,  leading  to  two  complete 
orbits per satellite per day (orbital period of  12 hours). The launch cost is higher than  for 
LEO satellites but the number of satellites required is lower. 

GEO (Geostationary Earth Orbit) 

GEOs  (at  36,000  km  in  the  Equatorial  plane)  have  been  used  for  telecommunications, 
television  and the navigation  satellite  system augmentations being developed  by the US, 
Europe and Japan (respectively, WAAS, EGNOS and MSAS). It involves a circular orbit 
of  a period  of  24  hours,  so  that  they  appear  to  be  stationary  over  a  fixed  point  on  the 
Earth's  surface.  However,  a  principal  disadvantage  is  that  high  latitudes  are  poorly 
covered. Further, the cost of the satellites and launches is relatively high. 

IGSO (Inclined Geosynchronous  Orbit) 

IGSOs (which  are a variation  on the GEO approach,  similarly at 36,000 km) follow  a 24 
hour circular period orbit, inclined at the Equatorial plane. This facilitates  coverage of the 
polar regions. No IGSOs have yet been brought into commercial  application.  The cost of 
the satellites and launches is relatively high. 

3<9 

ANNEX ILb):  ACRONYMS 

Global  systems 
GNSS: 
(Global Navigation  Satellite 
System) 
• GNSS-1 

• GNSS-2 

GPS: 
(Global Positioning  System) 
GLONASS: 
(Global Navigation  Satellite 
System) 
"GALILEO" 

a world-wide position, velocity and time determination 
system which fulfils  on a permanent basis potential user 
requirements for civil  applications 
an initial implementation of GNSS, based on GPS and 
GLONASS augmented by civil systems (such as 
EGNOS, WAAS and MSAS) 
a second generation system which meets the 
requirements of civil users for position, velocity and 
time determination and is capable of providing a sole 
means of navigation for defined  applications 
satellite positioning system developed, owned and 
operated by the US Department of Defense 
satellite positioning system developed by the USSR and 
now operated by the Russian Federation (currently the 
Ministry of Defence) 
proposed European contribution to GNSS-2 based on a 
satellite constellation, fully interoperable with the GPS 
signal structure. It will be integrated with augmentations 
and terrestrial systems to form the trans-European 
positioning and navigation network. 

multi-modal augmentation of GPS and GLONASS being 
developed by Europe. EGNOS will, as appropriate, be 
integrated into Galileo. 
regional augmentation of GPS being developed for civil 
aviation by the Japanese Civil Aviation Bureau 

Regional augmentations. 
designed  to provide the user with sufficient  independent  monitoring of the whole system, 
as well  as additional precision  and satellite availability 
EGNOS: 
(European  Geostationary 
Navigation Overlay Service) 
MS AS: 
(MTSAT1  Satellite-based 
Augmentation  System) 
WAAS: 
(Wide Area Augmentation 
System) 
LAAS: 
(Local Area Augmentation 
System) 

regional augmentation of GPS being developed for civil 
aviation by the US Federal Aviation Administration 

local augmentation, generally required for  specific 
applications, such as precision navigation (e.g. to support 
aircraft  landing and ship docking) or enhancement of 
satellite signals where necessary because of geography 
(e.g. the high latitudes). These may form  sub-regional 
networks. 
a correction of basic satellite signals (currently, GPS and 
GLONASS) calculated at ground stations and broadcast 
to provide local or wide area enhancements of services 

Differential  GNSS: 

MTSAT: Multi-functional  Transport  Satellite 

31 

ANNEX III  a): 

FINANCIAL  STATEMENT 

1. 

TITLE OF OPERATION 

Communication  from  the  Commission:  "Galileo  - 
generation of satellite navigation services" 

involving  Europe  in  a  new 

2. 

MAIN BUDGET HEADINGS INVOLVED 

B5-700 

Financial  support  for  projects  of  common  interest  in  the  trans-European 
network 

B6-6 

Fifth  Framework  Programme,  Information  Society  Technologies  (6-

6121) and Sustainable and Competitive Growth (6-6131) 

Other budget headings will be used as appropriate. 

3. 

LEGAL BASIS 

One or more of the following  depending on the actions undertaken: 

Articles 74, 84(2), 113,  129c and 130i of the Treaty. 

Decision  No  1692/96/EC  of  the  European  Parliament  and  of  the  Council  of  23 July 
1996  on  Community  guidelines  for  the  development  of  the  trans-European  transport 
network. 

Council Regulation (EC) No 2236/95 of 18 September  1995 laying down general rules 
for  the  granting  of  Community  financial  aid  in  the  field  of  trans-European  networks 
(and  proposed  amendment  to  Council  Regulation  2236/95  laying  down  general  rules 
for  the granting  of Community  financial  aid in the  field  of trans-European  Networks, 
COM (98) 723 final, 4 December 1998). 

Other relevant documents 

Communication  from  the  Commission  to the  Council  and  the  European  Parliament  -
'Towards a Trans-European positioning and navigation network: including a European 
Strategy for Global Navigation Satellite Systems (GNSS)' 

Council Conclusions of  17 March  1998 on a European  Strategy for  Global Navigation 
Satellite Systems (GNSS) 

European  Parliament  report  of  January  1999  on  a  European  Strategy  for  Global 
Navigation  Satellite Systems (GNSS) 

Annex III: 1 

3^ 

4. 

DESCRIPTION OF OPERATION 

4.1.  General  objective 

The  Communication  proposes  a  follow-up  to  the  strategy  developed  in  the 
Commission's  Communication  'Towards  a  Trans-European  positioning  and 
navigation  network:  including  a  European  Strategy  for  Global  Navigation 
Satellite Systems (GNSS)' (COM (98) 29 final  of 21 January  1998). It envisages 
development  of  a European  satellite  system  (Galileo)  which  will  contribute  to 
the implementation of a trans-European positioning  and navigation network. The 
objective  of  establishment  of  such  a  network  is  to  improve  the  efficiency  of 
transport  systems  by  placing  at  the  disposal  of  users  a  system  allowing 
geographical  positioning  and precision  timing. This  contributes  to  development 
of  sustainable  and  safe  mobility  for persons  and  goods, one  of the  fundamental 
objectives  of  the  Common  Transport  Policy.  The  strategy  also  supports  other 
Community  policies  such  as  for  employment,  industry,  environment,  cohesion 
and co-operation and development. 

More  specifically,  a  Galileo  would  provide  added-value  in  the  form  of  a 
controlled-access  service, for which a high level of service would be guaranteed, 
making  it  more  attractive  to  safety-critical  and  commercially-sensitive  users. It 
will  also  enable  PPP  structures  to be  developed,  involving  considerable  private 
investment in the development  of a system required  for public  strategic reasons. 
Different  possible revenue streams are identified  in the Communication,  some of 
which  require  regulatory  action  (Commission  proposals  to  the  Community 
institutions). 

Galileo  will  also  support  the  acquisition  of  a  share  of  the  rapidly  expanding 
global export market for European industry. 

4.2.  Period covered and arrangements for renewal or extension 

Full  implementation  of Galileo  is  expected  over  the period  2000-08. This  fiche 
considers  only  EU  Budget  financing  in  the  current  financing  period  (1999  -
2006) (extension  of provisions under  future  programmes  succeeding  the present 
TENs and 5th Framework Programmes may be envisaged) 

5. 

CLASSIFICATION OF EXPENDITURE OR REVENUE 

5.1.  Non-compulsory  expenditure 

5.2.  Differentiated  appropriations 

5.3.  Type of revenue involved 

Not  applicable 

Annex  III: 2 

*3 

TYPE  OF EXPENDITURE 

-  Subsidy  for  joint  financing  with  contributions  from  other  parties  (including  the 

European Space Agency, industry, national space agencies); 

-  Research and Development  activities (Framework Programme) 

-  Feasibility  studies and demonstration projects  (maximum  Community  contribution: 

50%) eligible for financial  aid under the TEN 

-  Grants or risk-capital participation for investment funds under the TEN 

-  TACIS support  for  training  and the conversion  of Russian  industries  from  military 

to civil purposes, in line with the Galileo programme 

- 

Interest-rate subsidies, funded  on European Investment Bank loans 

-  Loan guarantees premium, on European Investment Fund  guarantees 

FINANCIAL IMPACT 

7.1.  The  estimated  cost  of  Galileo  is between  €1.6  -  2.2  billion.  In  addition,  costs 

will  arise  from  the provision  of  a controlled  access  service,  security  and  safety 
certification  (approximately  €600-750  million).  As  far  as  the  EU  budget  is 
concerned,  these  costs  will  be  met  from  resources  already  envisaged  in  the 
existing  financial  programming,  mainly  for  TENs  and  the  Fifth  Framework 
Programme:  TENs  financing  is  an  issue  for  the  Agenda  2000  negotiations,  the 
Fifth  Framework  Programme  has  been  agreed.  The  Communication  sets  out 
other potential sources of finance. 

The table below  shows the breakdown  of expenditure  on  GNSS-1  and  GNSS-2 
to date: 

1995 

1996 

1997 

1998 

Total 

Ofwhich: 

GNSS-1  GNSS-2 

0 

0 

0.75 

0.81 

0.81 

2.38 

0.27 

0.62 

0.23 

1.12 

2.38 

1.12 

0 

0 

(€  million) 

B2-7  Transport 

Commitments 

Payments 

B5-700  Trans-European 
Networks 

Commitments 

9.50 

10.80 

6.60 

10.04 

36.94 

36.55 

0.39 

Payments 

4.75 

5.39 

0.55 

7.83 

18.52 

18.52 

0 

Annex  III: 3 

%h 

B6-7 Fourth Framework 
Programme 

Commitments 

8.10 

0.40 

5.08 

4.86 

18.43 

12.45 

Payments 

2.80 

2.27 

5.15 

2.20 

12.43 

9.95 

B7-8 External Aspects 
of Community  Policies 

Commitments 

Payments 

TOTAL 

0 

0 

0.23 

0 

0 

0.23 

0 

0 

0.23 

0.23 

0.23 

0.23 

Commitments 

17.60 

12.18 

12.49 

15.71 

57.98 

51.61 

Payments 

7.55 

7.94 

6.55 

10.26 

32.30 

29.82 

5.98 

2.47 

0 

0 

6.37 

2.47 

The total development  cost of Galileo, between now  and 2008, is expected to be 
as follows1: 

€  million2 

System  Engineering 
Management 

and 

142 

Space Segment 

MEO 
GEO 

Ground  Segment 

Operations 

868 
188 

252 

135 

Sub-total 

1584 

Certification 

Security 

249 

63 

Controlled Access  Service 

300 

TOTAL 

2198 

A more detailed breakdown of costs is attached at Annex III b). 
These figures  are based on a constellation of 21 MEO and 3 GEO satellites. The overall development 
costs might be reduced through technical cooperation with the Russian Federation. 

Annex III: 4 

1> 

For the fixed  costs, the following  indicative sources of revenue at European level 
have been identified  in the period 2000-6 only: 

Sources of Finance for Fixed Costs 
ESA3 
EC 
Of which: 
TEN-Transport 
FP5 + FP64 
TOTAL 

€  million 
500 
740 

500 
240 
1240 

7.2.  Itemised breakdown of cost5, 

Breakdown 
TENs (B5-700) 
Research (B6-6; 
FP5  only) 

1999 

30 

2000 
70 
30 

2001 
70 
30 

2002 
70 
30 

2003 
80 

2004 
70 

million  (currentprices) 
2008 
2007 

a 
2005 
70 

2006 
70 

Total 

30 

100 

100 

100 

80 

70 

70 

70 

tbd 

tbd 

The  annual  breakdown  of  financing  is  provisional,  and  will  depend  on  both  the 
phasing of the project and the availability of  funding. 

FRAUD PREVENTION MEASURES 

The  fraud  prevention  measures  contained  in  each  of  the  instruments  which  are 
proposed  to  finance  the  different  operations  will  apply.  These  include  inspections, 
reporting,  monitoring  and  evaluation  under  Regulation  2236/95,  as  amended,  laying 
down  general  rules  for  the  granting  of Community  financial  aid  in  the  field  of trans-
European  networks:  in  particular,  Articles  12(4)  and  (5)  provide  for  regular  on-the-
spot  checks  by  Commission  staff  and  Articles  15(5)  and  (7) provide  for  monitoring 
and evaluation.  Similar measures exist for the other Community  financial  instruments 
involved. 

ELEMENTS OF COST-EFFECTIVENESS ANALYSIS 

9.1.  Specific  and quantified  objectives; target population 

The  development  of  a  Galileo  would  require  significant  investment,  from  both 
the  public  and  private  sectors.  However,  the  strategic  importance  of  such  an 

Subject  to ESA  approval  procedures. 
This assumes  a continuation  of funding  by the Research Programme  beyond  2002 which  is subject  to 
evalution  of FP5 
Figures  applicable  from  2000  are indicative  and depend  on the approval  procedures  of the  respective 
instruments.  The table  considers  only  Community  instruments  (and not, for example,  ESA  funding). 

Annex  III: 5 

Total 
500 
120 

M 

infrastructure  is demonstrated by the level of investment by the US and  Russian 
governments  in their  systems. For example, US public investment  in the current 
GPS is estimated to have amounted to $ 10 billion already and the annual cost of 
sustaining the constellation is estimated at $ 420 million. 

Without Galileo, the EU would be entirely dependent on an externally  controlled 
and managed  system  for  safety-critical  applications  (aviation, maritime)  without 
any guarantees on continuity and acceptable levels of service. 

Furthermore,  the  investment  in  Galileo  makes  sense  in  economic  terms.  The 
GPS  hardware  market  in  Europe  was  estimated  by  US  researchers  in  1997  at 
$228.7 million and was anticipated  to grow to $960 million in 2004. A study on 
behalf  of  the  Commission  estimated  the  cumulative  GNSS  goods  and  services 
market  in  Europe  (1998-2007)  to  be  worth  €39  billion.  New  studies  have 
confirmed  further  important  benefits  which  would  depend  on having  Galileo  in 
addition  to  GPS,  including  an  additional  €40  billion  from  sales  of  equipment, 
and €40  billion from  value added  services over the period  2005-2023. Expected 
total  benefits  in  the  transport  sector  alone  are  in  the region  of €18 billion  over 
the first  five years of operation. 

The Community strategy has the following  objectives: 

— 

— 

— 

— 

improving the efficiency  of the multi-modal  transport  system  (increasing 
traffic  capacity,  reducing  environmental  damage  caused  by  transport, 
monitoring  consignments  of  dangerous  or  polluting  substances,  etc.) 
while increasing  safety; 

providing added-value through a highly accurate service, with guaranteed 
service levels for users with safety-critical needs; 

ensuring  close  co-operation  between  Member  States  and  institutions  in 
order  to  maximise  benefits  and  minimise  costs  at  the  Community  level 
and to support the development of interoperability within a global  system 
appropriate to present day and future transport needs; 

promoting European economic growth by stimulating the development of 
harmonised  standards  and  the  global  market  for  value-added  goods  and 
services, with significant  opportunities for European industry. 

9.2.  Grounds for the operation 

— 

The  Community  contribution  should  be  seen  in  the  context  of  the 
measures  to  implement  the  guidelines  for  the  development  of the  trans-
European  transport  network,  particularly  the  navigation  and  positioning 
network  and the Common Transport Policy.  Organising co-operation  on 
the basis of a clear strategy using the resources  available in Europe is the 
only means of ensuring a role for Europe in the development of GNSS. 

Annex III: 6 

n 

— 

In  its  Communication,  Towards  a  Trans-European  Positioning  and 
Navigation  Network,  (COM  (98)  29  of  21  January  1998),  which  was 
endorsed  by  the  Council  in  its  Conclusions  of  17  March  1998,  the 
Commission  set  out  the  need  for  efficient  and  cost-effective  navigation 
systems  for  civil  use  and compatible  with  military  needs, high  levels  of 
safety with adequate European control for  safety-dependent  systems, and 
opportunities  for  European  industry  in  the  emerging  satellite  navigation 
markets. 

— 

The  Commission  recommended  in  its  Communication  on  Space  (COM 
(96)  617  final  of 4 December  1996) the preparation  of  a  specific  action 
plan to develop GNSS as a key space application for European industry. 

9.3.  Monitoring and evaluation of the operation 

The  operation  must  be  monitored  and  evaluated  on  the  basis  of  the  following 
criteria: 

— 

— 

— 

— 

— 

contribution  to  sustainable  mobility  through  increase  in  air  space  and 
other traffic  capacity, 

reduction  of  environmental  damage  caused  by  transport  and  monitoring 
of consignments of dangerous or polluting substances; 

improved safety, leading to a reduction in the number of accidents caused 
by guidance system error or failure  (landing/ docking, collisions between 
vessels, etc.) 

rationalisation  and optimisation  of navigation  systems, leading to a more 
coherent  and  interoperable  global navigation  aid  structure  appropriate  to 
present day and future  transport needs; 

allowing  European  industry to  compete  fairly  and  freely  in  all  segments 
of  the  developing  satellite  navigation  market,  including  commercial 
transport  and  other  applications,  development  and  maintenance  of 
satellite  equipment,  ground  stations  and  receivers.  This  will  have  a 
significant  positive  effect  on  European  economic  growth  and 
employment. 

The  organisational  structure  put  forward  is  designed  to  ensure  the  cost-effective 
management of the project including effective  monitoring and evaluation. 

Annex III: 7 

^ 

10. 

ADMINISTRATIVE  EXPENDITURE  (PART  A  OF  SECTION  III  OF  THE  GENERAL 

BUDGET) 

The  allocation  of  administrative  resources  for  this  action  will  depend  on  the  annual 
Commission  decision  on  allocation  of  resources,  taking  particular  account  of 
additional  staff  and resources  granted  by  the budgetary  authority.  The  supplementary 
needs  cannot,  in  any  case,  prejudge  the  decisions  that  the  Commission  will  need  to 
take concerning: 

the request for new posts in the framework  of the annual budget proposals 
the resources allocation. 

10.1 Effect  on the number  of posts 

Type  of post 

Staff  to be assigned  to 
managing  the  operation 
Permanent 
posts 

Temporary 
posts 

Officials  or 
temporary 
staff 
Other  resources 

A 
B 
C 

Total 

4 
2 
2 

8 

Source 

Existing 
resources  in 
the DG or 
department 
concerned 
2 
1 
1 

4 

Duration 

Additional 
resources 

2 
1 
1 

4 

3 
3 
3 

3 

10.2.  Total financial  impact of human  resources 

Officials 
Temporary  agents 
Other  resources  (indicate 
budget  heading) 
TOTAL 

Amount  (0) 

Method  of  calculation 

2 520  000 

8 x3  years x  105 000 

2.520000 

The amounts  express  the  total  cost  of  the  additional posts  over  the  total  duration  of  the  operation  (if 
fixed)  or for  12 months  (if indefinite). 

Annex  III: 8 

3? 

10.3.  Increase in other  operating  expenditure  as a result  of the  operation 

Budget heading 
(number and title) 
A-7010 (Missions, travels...) 

Amount (U) 

Method of calculation 

105 000 

30  annual  missions  within 
the Community 
25  annual  missions  outside 
the Community 

TOTAL 

105 000 

Estimated expenditure on missions, by redeployment of existing resources: Article  A-130: 

Annex III: 9 

I) O 

Annex III b).  Galileo -  detailed breakdown of costs 

FIXED COSTS 

(Implementation) 

Development 

2 proto-
flight 
EGNOS 
reuse 

21MEOs 
3GEOs 

Total 
Implementation 
costs 

RECURRING 
COSTS 
per year 

2000-

2005 

2005-2008 

12000-2008 

Beyond 2008 

System Engineering 
and Management 
Total System 
Engineering and 
Management 
Space 
MEO 
Payload 
Platform 
Launches 
Insurance 
GEO 
Payload 
Platform 
Launches 
Insurance 
Total Space 
Ground Segment 
Mission 
MEO station 
GEO station 
Total ground  segment 
Operations 
Total operations 
Sub-total 
Certification 
Security 
Controlled Access 
Service 
GNSS  organisational 
framework  (annual 
running costs:  this will 
initially rely on  staff 
seconded from  national 
administrations) 
TOTAL 

15 

37 

90 

142 

65 
83 

25 

173 

-

-
188 
34 
-
50 

24 
38 
48 
18 

128 

68 
33 
20 
121 

55 
341 
26 
32 
50 

116 
158 
232 
86 

-
70 
67 
26 
755 

92 
21 
18 
131 

80 
1056 
189 
31 
200 

205 
279 
280 
104 

-
95 
67 
26 
1056 

252 

135 
1585 
249 
63 
300 

1.2 

60 

10.8 

70.8 

56 
128 
5.6 
-
6.4 

15 

272 

449 

1476 

2197 

155 

Figures above are based on submissions made by industry in the framework  of ESA's GNSS-
2  systems  comparative  study.  These  are  indicative  only  and  do  not  necessarily  reflect  the 
opinion of the Commission. 

Annex III: 10 

V 

ANNEX IV: MARKET ANALYSIS AND ECONOMIC  BENEFITS 

Some of the main benefits  of Galileo  are political rather than economic, notably  the  advantage 
of  retaining  control  over  safety  critical  services.  Other  economic  benefits,  such  as  providing 
'insurance'  against  future  charging  for  GPS,  are  difficult  to  quantify.  The  analysis  below  can 
therefore  give only a partial view, concentrating on1: 

•  How Galileo will enlarge the overall market for  satellite navigation, primarily because GPS 

and Galileo together can provide a  more accurate and reliable service ; 

•  How  Galileo  will  improve  prospects  for  European  firms,  because  they  will  have  a  larger 

share of a larger market; 

•  The direct and indirect benefits to users from  Galileo. 

No  reliable  figures  are  available  on  the  extent  to  which  Galileo  will  produce  savings  by 
replacing  existing  navigation  aids, though this  is also  likely  to be  significant.  Market  forecasts 
over  such  a long  period,  in  an  area  where  technological  change  is rapid,  must  be  treated  with 
considerable  caution, though the broad  orders of magnitude  indicate  that  the overall  economic 
benefits  are very  significant.  (For  example, the new  generation  of mobile  phone  technology  -
UTMS-  has  the  potential  to  combine  with  Galileo  in  some  functions,  and  to  displace  it  in 
others). A priority  for  the project  definition  phase  (June  1999 to December  2000)  is to take the 
market analysis to a stage where firm decisions can be taken on system performance,  and where 
the  private  sector  is  willing  to  make  financial  commitments  on  the  basis  of  future  expected 
revenue. 
It  is  important  to  distinguish  between  the  benefits  identified  here,  which  relate  to  the  socio 
economic  desirability  of  Galileo,  and  the  issue  of  financial  viability.  Many  of  the  benefits 
identified  here  will  not  result  in  project  revenue  without  regulatory  action.  Nonetheless,  the 
prospect of greater involvement of European industry in the applications market should increase 
its willingness to participate in a PPP to put Galileo in place. 

The impact of Galileo on the satellite navigation  market 

A key  measure  of market  growth  is the penetration  rate, which  indicates what proportion  of  a 
category  (e.g.  new  cars)  is  fitted  with  a navigation  device.  Forecasts  suggest  that  penetration 
rates  will  rise much  more  rapidly,  to  a higher  'saturation'  rate  in  the  GPS  +  Galileo  scenario 
compared  to  the  GPS  only  scenario.  Among  the  segments  where  the  difference  is  particularly 
significant  are: 

• 

• 

• 

automobile navigation (reaching a maximum of  93% in 2013 compared to 90% in 2016); 

railways (reaching a maximum of  50% in 2019 compared to  10% in 2016); 

fleet management  (reaching a maximum of  95% in 2013 compared to 90% in 2016); and 

•  mobile telephony (reaching a maximum of 70% in 2014 compared to 55% in 2018). 

1  Most  of  these  figures  were  produced  by  industry  in  the  framework  of  an  ESA 
comparative study. 

L^1±<ri 

This difference  is explained by the  fact  that these  segments  are particularly  sensitive to  service 
maintenance  and accuracy  in built up areas and in terrain  (e.g. forested  areas  and deep  valleys) 
which "traditional" GPS receivers find  difficult,  and where interoperable Galileo/GPS will  offer 
an improved service. 

Economic  benefits  for  Europe 

The  following  table  gives  an  estimate  of  gross  economic  benefits  (turnover  for  European 
industry, and direct benefits  for European users) from  equipment sales and value-added  services 
in the satellite navigation market,  on a baseline GPS scenario,  and  on a GPS+Galileo scenario. 
It suggests that the benefits  of Galileo could amount to around €80billion over the period  2005-
23.  These  benefits  arise  from  a  combination  of  a  larger  market 
(as  indicated  above)  and  a 
bigger  share  for  European  industry.  On  the  latter,  it  is  assumed  that  the  market  share  for  EU 
industry  under  the  Galileo+GPS  scenario  (rising  from  30%  in  2005  to  60%  in  2023)  is 
substantially  higher  than  for  GPS  alone,  (15  and  30% respectively).  These  figures  result  from 
research with industry, but are subject to a considerable margin of error. The figures  do not take 
account of displacement  effects. 

These  figures  do  not,  however,  take  account  of  indirect  benefits  of  Galileo,  which  arise  for 
those  not  using  the  service  directly  (e.g.  reduced  congestion,  environmental  benefits).  These 
can however,  be  expected  to  be  significant,  given  that,  generally,  about  half  of  all  congestion 
costs are 'indirect'. 

Value Added Services 

Equipment  sales 

2005-23 

GPS 

GPS + Galileo 

Benefits  of Galileo 

€ 7 4 bn 

€113 bn 

€39bn 

€79 bn 

€122 bn 

€43bn 

Total 

€154bn 

€235bn 

€82bn 

^ 

^r 

ISSN 0254-1475 

COM(99) 54  final 

DOCUMENTS 

EN 

15  16  06  07 

Catalogue number  :  CB-CO-99-069-EN-C 

Office  for Official  Publications of the European  Communities 

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