2 Global navigation satellite system
| (a)
(27592)
10427/06
COM(06) 272
(b)
(28154)
16540/1/06
+ REV1
COM(06) 769
(c)
(28660)
7828/07 +ADD1
COM(07) 261
|
Commission Communication: Taking stock of the Galileo programme
Green Paper on satellite navigation applications
Commission Communication: Galileo at a cross-road: the implementation of the European GNSS programmes
|
| Legal base | — |
| Documents originated | (a) 7 June 2006
(b) 12 December 2006
(c) 16 May 2007
|
| Documents deposited in Parliament | (a) 20 June 2006
(b) 12 December 2006
(c) 31 May 2007
|
| Department | Transport |
| Basis of consideration | (a) Minister's letter of 4 June 2007
(b) Minister's letter of 8 May 2007
(c) EM of 4 June 2007
|
| Previous Committee Report | (a) HC 41-xx (2006-07), para 12 (2 May 2007)
(b) HC 41-vii (2006-07), para 5 (24 January 2007)
(c) None
|
| To be discussed in Council | (a) Already discussed
(b) Not known
(c) 7-8 June 2007
|
| Committee's assessment | Politically important
|
| Committee's decision | (a) Cleared (decision reported 19 July 2006)
(b) Cleared, but relevant to the debate on (c)
(c) For debate on the Floor of the House
|
Background
2.1 The Community has a two-phase policy for developing a global
navigation satellite system (GNSS). The first phase, GNSS 1, is
the European Geostationary Navigation Overlay System (EGNOS) programme.
The second phase, GNSS 2, is the programme, named Galileo, to
establish a new satellite navigation constellation with appropriate
ground infrastructure. Galileo is based on the presumption that
Europe ought not to rely indefinitely on the GPS (the US Global
Positioning System) and GLONASS (the Russian Global Navigation
Satellite System) systems, augmented by EGNOS. Galileo is being
carried out in conjunction with the European Space Agency (ESA).
There are a number of agreements in place or being negotiated
with third countries about cooperation in the Galileo project.
2.2 It is intended that Galileo will allow provision of five services.
These are known as the:
- Open Service (OS), free of charge at the point of use;
- Commercial Service (CS), offering added value for more demanding
uses;
- Safety of Life Service (SoL), for safety-critical applications
that require high integrity;
- Search and Rescue Service (SAR), to complement the current
COSPAS-SARSAT system (International Satellite Search and Rescue
System founded by Canada, France, the former USSR and the USA
in 1988 and with 33 countries now participating); and
- Public Regulated Service (PRS), a high-performance, encrypted
service for authorised civil government applications.
2.3 The Galileo programme has three phases:
- the development and validation phase — development of
the satellites and the system's ground components, as well as
validation in orbit (IOV). This phase was due to run from 2003
to 2005, but will now continue until 2009. The project is currently
in the validation part of this phase;
- the deployment phase — building and launching 30 satellites
and the establishment of the entire ground-based component. This
phase was due for completion in 2006 and 2007 but will now be
taken forward between 2009 and 2010; and
- the commercial operating phase — commencement of the
full commercial operation of the system. This phase was due to
begin in 2008 and will now begin from the end of 2010.
2.4 It has been intended that a public private partnership (PPP)
be established for the Galileo programme. The Galileo Joint Undertaking
(GJU), which was wound up with effect from 31 December 2006, was
responsible for managing the programme's development phase for
the Community and the ESA, including the procedure to select the
future private-sector concessionaire to run the PPP. In 2004 a
GNSS Supervisory Authority (GSA) was established to manage the
public interests relating to European satellite radio-navigation
programmes — currently EGNOS and Galileo. It is to be the
formal owner of these two systems and to act as the regulatory
authority for the concessionaire during deployment and operation.
The GSA has taken over the functions of the GJU, including responsibility
for negotiations with the consortium[5]
bidding to be the concessionaire.
2.5 From early in 1999 we and previous Committees have reported
to the House on many aspects of the Galileo project, most recently
in January, on document (b), and May 2007, on document (a).[6]
(The matter has also been debated three times in European Standing
Committee A, the last occasion being 2 December 2004).[7]
In May 2007 we considered a Government report, further to the
Commission Communication Taking stock of the Galileo programme,
document (a), which we had cleared earlier, about further
delays to the project contract negotiations and the consequent
continued lack of a complete, transparent and properly assessed
proposition on how the project is to be financed and carried forward.
In particular we were told that in March 2007 the Transport Council
had set a deadline of 10 May 2007 for the bidding consortium to
put itself in a position to resume meaningful negotiations and
had asked the Commission to report back for the Council's 7-8
June 2007 meeting on how matters stand on the whole Galileo project
and on alternative scenarios for carrying the project forward.
We commented that we hoped that we would be able to hear about
further developments before that meeting of the Transport Council
and noted that we expected the timing of any critical decisions
to allow proper prior scrutiny by national parliaments.
2.6 Document (b) is a Green Paper on possible applications of
the Community's GNSS. It sought comment, by 6 April 2007, on possible
applications of four of the proposed Galileo services (that is
excluding the Public Regulated Service). The aim of the Green
Paper was to "launch a discussion on what the public sector
can do to create an appropriate policy and legal framework for
supporting the development of satellite navigation applications,
beyond the financial support for research and the creation of
infrastructure".
2.7 The Commission suggested applications might fall into 12 different
areas and asked respondents to address a series of questions on
various issues including GNSS itself, market use, benefits, ethical
and privacy issues, research, small and medium enterprises, international
cooperation, standardisation of devices and services, certification,
frequency coordination, intellectual and property rights and potential
legal and regulatory barriers.
2.8 When we considered this document in January 2007 we noted
that it indicated some of the economic opportunities that could
arise from GNSS applications but, despite its endorsement of the
potential, that the Government was approaching the matter with
some caution — an approach we commended. We said that before
considering the document further we should like to see the Government's
formal response to the Green Paper. Meanwhile we kept the document
under scrutiny.
The new document
2.9 The Commission Communication: Galileo at a cross-road:
the implementation of the European GNSS programmes, document
(c), is the response to the Transport Council's March 2007 request.
It also takes account of a European Parliament resolution of 24
April 2007 outlining its support for the project and its dissatisfaction
with the ongoing delays. In essence the Commission says that it
is not satisfied that the consortium has fulfilled the conditions
laid down by the Transport Council in March 2007 and recommends
to the Council that it should end the negotiations and reassess
the way forward.
2.10 In the Communication the Commission first summarises the
programme to date and outlines the problems experienced in the
negotiation of the PPP contract. The Commission:
- says that EGNOS and Galileo have a cumulated delay of five
years in relation to the original calendar;
- argues that the Community must act quickly and decisively;
- asserts that the difficulties of risk transfer to the private
sector and the technological complexity of EGNOS and Galileo were
underestimated and that the industrial and public governance structures
have been problematic, with the consequence that the Community's
expectations on cost and timetable were over optimistic;
- argues that continuing with the PPP model would delay full
deployment until 2014 at the earliest, significantly reducing
the project's commercial viability because the third generation
of GPS is expected to be available by then;
- acknowledges several of the reasons for the failure of negotiations
made in a letter of 9 March 2007 to the Presidency and the Commission
from the merged consortium, but says the root cause has been the
composition and ungovernability of the consortium, its inability
to manage the negotiation process, to agree on a common position,
and to focus on revenues; and
- "invites the Council and the European Parliament to take
note of the failure of the current concession negotiation and
to conclude that, on this basis, the current PPP negotiations
should be ended".
2.11 The Commission then restates arguments for a European satellite
navigation system and argues against any changes in the requirements
of the system or its services. The Commission:
- lists Community policy areas that can be positively enhanced
by a European GNSS;
- argues that Galileo is a flagship project, for its strategic
value and for its contribution to the Lisbon Strategy;
- says that without Galileo, Europe would be the only major
world economy lacking such a strategic asset;
- says that Galileo is a pillar of the emerging European Space
Policy and signifies Europe's ambitions in space, technology and
innovation;
- gives an estimate of €450 billion (£306.01 billion)
for the annual market in satellite navigation systems and applications
by 2025;
- gives the sunk costs in the programme as €2.50 billion
to date (£1.70 billion);
- says the system characteristics adopted for Galileo are the
result of about ten years of design and technical qualification;
- asserts that any radical change of design would lead to cancellation
of development phase industrial contracts and to a re-bidding
for the entire programme; and
- "invites the Council and the European Parliament to reaffirm
the necessity to put in place an autonomous satellite navigation
system, to endorse the continuation of the Galileo programme as
a strategic asset for the European Union, and to recognise its
economic value" and "to recognise that the Galileo system
characteristics remain fully compatible with the ambitions of
the European Union for this strategic asset, namely a 30 satellites
constellation offering five different services with an excellent
quality of the signal in space".
2.12 Next the Commission acknowledges that a PPP provides the
best means to control costs, manage risks and optimise market
exploitation. It argues that this has not been achievable in the
current negotiations, partly because of the consortium's unwillingness
to accept risk. The Commission then presents alternative scenarios
for taking forward the project:
- public procurement of 18 satellites — initial operational
capacity, followed by a PPP for completion of deployment and exploitation
until 2030; or
- public procurement of 30 satellites — full operational
capacity , followed by a PPP for exploitation until 2030.
The Commission discusses the timing and financial implications
of these scenarios. It claims that:
- public procurement of 30 satellites would cost an additional
€2.40 billion (£1.63 billion) for the financial period
2007-2013 and that public procurement of 18 satellites would cost
€1.00 billion (£1.47 billion) more than procuring 30;
and
- public procurement of 30 satellites would permit full service
provision and performance availability by the end of 2012 and
public procurement of 18 satellites would permit full availability
by the end of 2013.
The Commission concludes this section by inviting "the Council
and the European Parliament to:
- confirm that it is necessary, appropriate, and in the interest
of the European GNSS programmes to proceed with their implementation
through an alternative scenario;
- take note of the relevant advantages and financial implications
of the available, realistic scenarios; and
- take note in particular of the importance of an early completion
of the full constellation, and the cost implied by delays in political
decisions."
2.13 The Commission follows this with "A Strategic Assessment"
which it introduces by saying:
"On the basis of its assessment, the Commission invites
Council and European Parliament to conclude that the preferred
option and only scenario providing a satisfactory way forward
is a re-profiled, two-step PPP approach:
(1) Step 1: start with the immediate implementation
of EGNOS, through a specific concession, as a precursor to Galileo
with initial service availability by early 2008, and complement
the current public procurement of the initial satellites and infrastructure
by deploying the first full Galileo constellation under a public
procurement with a target of Full Operational Capability by end
2012.
(2) Step 2: In parallel, negotiate and put in
place a PPP for the subsequent EGNOS and Galileo exploitation
phase from 2010-2030."
The Commission bases this recommendation on "high
programmatic certainty the fully fledged program logic (essential
for a smooth hand-over to a concession holder), the best re-use
of investments of the development phase (restoring confidence
and motivating the industrial teams), the fastest time-to-market
(offering the best chance of a significant Galileo market share),
and last but not least best value-for-money".
2.14 The Commission continues its strategic assessment
with three further points:
- calling for retention of the
ESA as the procurement agent and design authority on behalf of
the Community, but operating under the Community, with the Commission
in overall lead, rather than as for the current development phase,
which is a joint project between ESA and the Community;
- arguing the governance of the
programme should be reassessed with a re-evaluation of the role
and structure of the GSA; and
- discussing preparation of markets
and possible revenue sources.[8]
The Commission concludes this section by inviting
"the Council and the European Parliament to proceed on the
basis of the following principles:
1) Recognise that EGNOS will achieve operational
capability by early 2008 and immediate action is required to implement
its services as a pre-cursor to Galileo.
2) Recognise that the European GNSS programmes
are defined, agreed, managed, and overseen at the level of the
European Union in the interest of all of its Member States.
3) Recognise the strategic nature of the Galileo
programme and the critical role of broad-based European industrial
supply and private sector participation therein.
4) Retain the European Space Agency (ESA) as
the procurement agent and design authority on behalf of the European
Union, and acting under the latter's authority and rules.
5) The need to introduce robust and fair competition
in the programme on the basis of dual-sourcing and regular competitive
tendering in all elements of the programme, wherever possible,
in order to improve efficiency and decrease dependencies. Due
account needs to be taken of existing achievements and investments,
and of agreements as far as relevant.
6) Recognise the need for the strengthening and
restructuring of the public governance of the European GNSS programmes
on the basis of political responsibility and leadership of the
Commission, on the basis of proposals by the latter.
7) Recognise the need to provide confidence to
downstream investors in services and applications through firm
commitments on delivering Galileo on time, based on fair and non-discriminatory
access to its services."
2.15 In the final section of the Communication the
Commission discusses the additional financial means that would
be required for financing the programme. It concludes by inviting
"the Council and the European Parliament to:
- secure, as a first step, the
progress of the EGNOS and Galileo projects, to advance rapidly
with the adoption of the currently proposed EU Programme Regulation;[9]
- examine the possibilities for
additional financing; and
- discuss and agree, on the basis
of a proposal that the Commission will present by September 2007,
the modalities on how to proceed in view of the financing gap,
including, if necessary, a financing mechanism which will cover
the entire period until 2030."
2.16 The Communication is supported by a Commission
staff working document, which provides some more detail and background
— it is not a cost benefit analysis although it includes
some approximate figures.
The Government's view
2.17 In his letter of 4 June 2007 the Minister of
State, Department for Transport (Dr Stephen Ladyman) responds
to our May 2007 comments on the Government's further report in
relation to the Commission Communication Taking stock of the
Galileo programme, document (a). He reminds us that the contract
negotiations with the consortium bidding for the PPP have been
at a standstill for a number of months. He says:
- there are difficulties in reaching
agreement with the consortium on the level of risk transfer and
mitigation;
- it remains concerned about
the long term certainty of public sector funding; and
- there are various institutional
issues on the IOV of the programme and the transfer of the EGNOS
augmentation programme to the concessionaire.
The Minister comments that while all of these are
important issues which need to be addressed, the principal reason
for the problems in the negotiations was the inability of the
merged consortium to agree on its governance structure, including
the appointment of a CEO with full negotiating powers and the
distribution of infrastructure and sharing of work.
2.18 The Minister also reminds us of the March 2007
Transport Council conclusions which suggested that the Transport
Council meeting of 7-8 June 2007 would allow Member States a detailed
discussion of whether to proceed with current negotiations or
adopt an alternative approach for delivering the programme on
the basis of a new Commission Communication. The remainder of
the Minister's letter reiterates and emphasises some of the important
policy points made in his Explanatory Memorandum on that Commission
Communication: Galileo at a cross-road: the implementation
of the European GNSS programmes, document (c).
2.19 On the Commission Communication: Galileo
at a cross-road: the implementation of the European GNSS programmes,
document (c) the Minister comments that the Government continues
to maintain its priority objectives for the programme:
- achieve a robust and viable
PPP;
- influence the development and
financial control of the project to ensure a transparent process
which can deliver a value for money deal for the Community;
- maintain Galileo as a civil
programme under civil control; and
- secure maximum benefit for
the UK and Community from Galileo, including promoting the bid
for Cardiff to host the GSA.
2.20 The Minister tells us that:
- the Government has serious
concerns about the proposal to move Galileo to public procurement.
Its preferred option is for a remodelled PPP that addresses the
problems of the current structure;
- the Government appears alone
in adhering to this view — other Member States view the
failure of the current negotiations as ending the possibility
of any PPP for the deployment of the system and appear to be convinced
by the arguments for public procurement of all 30 satellites;
- other Member States are strongly
committed to the idea of a European satellite system;
- the Commission was under substantial
time pressure to produce the Communication and the document understandably
suffers from this pressure. It is neither a comprehensive reflection
of the current situation nor a rigorous examination of the case
for the project. For instance, it fails to note the significant
time and cost delays of the IOV programme, managed by the ESA;
- there is no adequate consideration
of risk, and the cost estimates are approximate. Some costs and
risks do not seem to have been included;
- the Government has strong reservations
on the Commission's assessment of the situation, in particular
on predicted revenues, costs, risks, budgetary impact and timetable.
It believes the Commission's estimates are extremely limited,
and do not, for instance, take account of experience with the
EGNOS and IOV programmes;
- the Commission argues that
European industry would be in a bad position to benefit from the
applications market without Galileo. But it does not acknowledge
that European industry already exploits GPS successfully nor does
it acknowledge the impact of the Community/US agreement on complementarity
of the Galileo and GPS signals;
- the Commission analysis is
flawed in that it does not consider starting a new PPP procurement
on a similar basis to the current one but approaching it with
greater rigour and with proper industrial competition —
something that has been lacking since the merger of the two remaining
consortia;
- the Government accepts that
the current PPP negotiations have broken down and believes this
should be used as an opportunity to evaluate the causes of the
difficulties rigorously and to consider the options for taking
the project forward with the maximum chance of success;
- in the two scenarios it puts
forward the Commission suggests that a PPP would follow the public
procurement. However, if there were to be public procurement of
30 satellites, the problems of transferring design and market
risk would be increased, not least because the ESA, under its
Convention, does not accept liability. An ensuing contract would
at best be a private operating contract rather than a PPP;
- the Commission mentions potential
revenues from military users of the system. Galileo has been defined
and agreed as a civil programme since its inception. While its
open service, like that of GPS, can be accessed by anyone and
could therefore be used by military forces, Galileo remains a
civil programme under civil control. This has repeatedly been
confirmed by the Transport Council, most recently in October 2006
and the Government remains strongly committed to this principle;
- the Government has consistently
argued that the Community must be in a position to take an informed
decision on Galileo. If the PPP is abandoned by consensus and
it is evident that the programme will be proceeding by some other
means, it will work for a more thorough assessment of the cost,
risk and affordability, open and competitive procurement and value
for money;
- on funding the Government is
strongly committed to the budget ceilings and to ensuring that
there is no re-opening of the Financial Perspectives. It will
require more information on funding sources and provisions before
any final decision. Member States need a greater degree of certainty
on the total cost of the programme required, the level of risk,
the sources of private sector revenue and the sources of funding
from the Community Budget;
- ending the current PPP and
delivering Galileo through other means would inevitably have significant
financial implications. To ensure that the principles of budget
discipline and sound financial management are upheld, the Government
will argue that it is essential that the ECOFIN Council is given
the opportunity to discuss the issue — for an informed discussion,
prior to a decision on how to proceed, more certainty is required
on the predicted private sector revenues, costs, associated risks
and budgetary implications;
- in working group discussion
the Government has said that it would be unhappy with a final
decision being taken in June 2007, with such little time to consider
the Commission's options. However, the majority of Member States
have been pushing for a decision to be taken quickly in order
to minimise delay to the project. Nonetheless, the Government
will continue to press for a longer timescale for consideration
which would also allow other Council formations, as appropriate,
and national parliaments time to consider the issues; and
- at the 7-8 June 2007 Transport
Council the Government expects Member States to be asked to acknowledge
that the current PPP negotiations have failed and to request the
Commission to prepare detailed options for taking the programme
forward, including on funding requirements, a procurement strategy,
and governance proposals, for the following Transport Council
in October 2007.
2.21 With his letter of 8 May 2007 the Minister now
sends us a copy of the Government's response to the Green Paper,
document (b). In commenting on this the Minister reminds us that
the Government thinks that the Green Paper itself is not a well-focussed
consultation document and that it makes a number of over-optimistic
assumptions about satellite navigation systems. He says the Government
challenged these assumptions in its response as it is important
not to create false expectations of any system.
2.22 The Minister continues that the Green Paper
was aimed primarily at non-public sector stakeholders —
for example manufacturers and innovators. There were, however,
important points of principle on which the Government needed to
respond, such as its opposition to "mandating" Galileo
charged services through Community legislation, that is requiring
the use of Galileo as the technology for a service. The Government's
response emphasised:
- the need to have Galileo operational
as soon as possible, so that it will have the opportunity to establish
itself in the marketplace before its competitive advantages are
challenged by other competing systems;
- its firm opposition to the
mandating of Galileo charged services; and
- the need to provide an appropriate
competitive environment for small and medium enterprises.
2.23 The Minister tells us that the Commission expects
to present an analysis of the responses to the Green Paper, together
with an action plan with practical measures proposed for 2008
onwards, in September 2007. But he adds that it is highly likely
this analysis may be delayed because of the difficulties on progress
with Galileo.
Conclusion
2.24 The Commission's new Communication, document
(c), marks a critical stage in the future of the Galileo project.
It appears to us as a carefully constructed series of statements
which, albeit largely not properly substantiated, the Commission
wishes the Council to endorse so as to underpin an immediate decision
on its preferred option of public procurement of all 30 satellites.
The Minister suggests that no final decision on the future of
Galileo should be taken until the Commission's ideas on how to
carry forward and fund Galileo are fully developed and explained.
We agree with this position. However we suggest that there is
a prior assertion from the Commission, which the Minister touches
on only briefly, which perhaps also needs to be fully tested —
that is the case for continuing the Galileo project at all, rather
than writing off the sunk cost and letting Europe's industry continue
to exploit the existing and developing opportunities available
through GPS uses.
2.25 Given all this we would not find it acceptable,
and we think this is a view that would be shared by other national
parliaments, if a Council Resolution or Conclusion at the Transport
Council on 7/8 June 2007, goes beyond accepting that:
- the present PPP negotiations
should not be continued; and
- the Commission should produce
a fully substantiated case for continuing the Galileo project
in terms of methods of implementation (public procurement or PPP),
governance and finances, including the total cost of the programme
required, the level of risk, the sources of private sector revenue
and the sources of funding from the Community Budget.
And we remind the Government that we expect the
timing of any critical decisions to allow proper prior scrutiny
by national parliaments.
2.26 Whatever the outcome of the Transport Council
on 7-8 June 2007 we think that Members would now want to debate
where matters stand on the Galileo project. Accordingly we recommend
that the Commission Communication Galileo at a cross-road:
the implementation of the European GNSS programmes, document
(c), be debated on the Floor of the House. This debate should
take place before the October 2007 Transport Council. And it would
be helpful if the Minister were to send us as soon as possible
an account of the June 2007 Council discussion so that we can
report it to the House in time for the recommended debate.
2.27 We are grateful to the Minister for his account
of the Government's response to the Green Paper, document (b)
and now clear the document. However we note that it is relevant
to the debate we have recommended on document (c).
5 The consortium comprises eight companies - Aena,
Alcatel, EADS, Finmeccanica, Hispasat, Inmarsat, Thales and TeleOp
- from the Member States with major space industries, France,
Germany, Italy, Spain and UK. Back
6
See headnote. Back
7
See Stg Co Deb, European Standing Committee A, 2 December
2004, cols 3-30. Back
8
In that context the Commission comments "Whilst maintaining
the system as a civil system significant revenues could also come
from military users. There have been considerable discussions
on the use of the PRS signal over the past years, this need to
be continued," and "In the context of the recent proposal
for a European Space Policy [(28598) 9052/07: see HC 41-xxii (2006-07),
para 16 (16 May 2007)], the Commission took the view that civilian
space programmes, such as Galileo, have a multiple-use capacity
and may have military users." Back
9
(25879) 11834/04: see HC 42-xxxvii (2003-04), para 1 (17 November
2004) and Stg Co Deb, European Standing Committee A, 2
December 2004, cols 3-30. Back
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