Independent study confirms economic viability of Galileo
An independent study conducted for the European Commission has concluded that Galileo, the European satellite navigation programme, is financially justified and will generate considerable economic benefits. The findings of the study, which was carried out by a private consortium appointed by the Commission and led by PricewaterhouseCoopers, may help to counter some MEPs' concerns over the financial viability of the project. At a debate on the Commission's Galileo communication adopted by the European Parliament on 3 October, MEPs called for moves to clarify and secure private sector funding to ensure that the financial consequences of a lack of private financial backing would not be passed on to national and Community budgets. The study consortium, which was given the task of developing a business plan for the project, concluded that the project will generate significant revenue and will achieve positive operating cashflow just three years after beginning operation, from 2011 onwards. EU transport Commissioner Loyola de Palacio said: 'This is very good news for Galileo. The results of this study back Europe's intention to become a major player in the strategically important area of navigation and positioning by satellite.' The study confirms previous estimates of the costs of the Galileo project, set at 3.6 billion euro for completion the system infrastructure, including allowance for a 'worst case scenario' with significant contingencies and spare satellites. It also concluded that Galileo is economically justified, with the cost-benefit analysis showing a strong case for public sector commitment to the project. The business plan developed in the study shows a higher positive cost-benefit ratio for Galileo than for other comparable publicly-funded transport infrastructure projects such as motorways and airports. It estimates total benefits of 17.8 billion euro at a total cost, including operation of the system, of only 3.9 billion euro. The ultimate benefit could be even higher, as the study only took transport sector benefits into account for the analysis. The study also underlines the potential benefits of the Galileo project over a wide range of sectors from transport to energy exploration and agriculture, in addition to significant social benefits such as environmental protection, the creation of employment and European technological development. Two major sources of market revenue were identified in the study - royalties from chipset (video, image and other data) sales and revenues from service providers. While the development phase will be financed by Community and ESA funds totalling around 1,350 million euro, the study also advises the creation of a concession scheme to allow financing of the deployment phase by the private sector, up to the value of 2000 million euro, in return for payments for service provision. It recommends that the concession terms be drawn up by the European space agency-EU joint undertaking. The study suggests that these payments be financed through a public sector tax or levy on the sale of global navigation satellite systems. The study results come ahead of the Council of Transport Ministers meeting on 6 and 7 December 2001 where Ministers are expected to decide on the organisational structure for the project and the release of the remaining funds for the development phase. The Galileo initiative, which will complement its Russian and American counterparts Glonass and GPS, has three remaining phases: development until 2005 and deployment until 2007, followed by operation and application.