Last week, in an extraordinary move, two Israeli ministries united to support one decision in principle: to expedite Israel’s participation in the European Space Agency’s (ESA) Galileo Project.
Galileo is intended to be the European answer to America’s GPS. Galileo will be a satellite location, navigation, and timing system for a range of existing and future applications. The European Union (EU) has two motives in promoting Galileo: first are the applications that will benefit EU citizens, such as more efficient train and plane networks, better traffic control, etc.; second are the potential profits from user fees from commercial concerns using Galileo’s services.
The EU is investing an estimated €3.5 billion in Galileo. The project’s definitions stage has been completed at a negligible cost. The development stage has started and is scheduled to be completed in 2005, at an estimated cost of €1.38 billion. Next is the deployment stage in 2006-07, at a cost of €2.03 billion. The operational target date is 2008, two year before third generation GPS is completed, thereby exploiting a window of technological superiority.
Galileo will ultimately comprise 30 satellites, with eight more kept on the ground as backups in the event of a breakdown of a satellite in space. Simultaneously, a network of ground stations will be deployed to provide high-quality signal reception in cities - a weak point for GPS, which needs a direct line of sight between the user and satellite.
A mixed public-private body (joint undertaking) will manage Galileo’s development and deployment. The public party comprises the ESA and EU and other countries, such as Israel, participating in the project. The private party comprises the participating manufacturers, service providers, and institutions. The public may participate at a later date.
The joint undertaking will act as Galileo’s management board. When deployment begins, management will be transferred to an operator who will pay royalties and user fees for rights. One alternative, still under examination, is to eliminate the private party altogether in favor of a Private Public Partnership (PPP), i.e. continued public-private joint undertaking.
A preliminary business viability study by PricewaterhouseCoopers (PwC) commissioned by the EU and commercial concerns interested in Galileo estimates the operator will earn €66 million in 2010, €370 million in 2015, and €515 million in 2020. PwC goes on to note that indirect profits from more efficient land, sea, and air transport should be added to these figures. PwC predicts that airlines will save an aggregate €3.38 billion and passengers €1.67 billion a year by 2020
Promoting Israel’s interests in Galileo is the Ministry of Industry Trade and Labor, whose Foreign Trade Administration director of bilateral trade agreements is Adv. Boaz Hirsch. Hirsch notes that the paramount difference between GPS and Galileo is that Galileo is designed as a civilian system with military applications, while GPS was the opposite. Another difference is that Galileo is open to third country participation, whereas GPS is purely US project, closed to other countries.
Although the Europeans talk about Galileo’s direct and indirect commercial advantages, Ministry of Industry Trade and Labor officials believe there is another motive as well: Europe is a unified economic power that is developing into a political power with a unified military arm that must sever its dependence on America’s GPS.
Israel has no interest in that motive, but sees many advantages for the country’s industry in participating in Galileo. “Israel’s space industry is limited,” says Ministry of Industry Trade and Labor deputy director general director of Foreign Trade Administration Ronit Kan. “We have basic capabilities in this field, and we believe it has great potential in the coming decade. Galileo is unquestionably an entry ticket to future developments by aerospace industries. It is a basis for expanding the potential of Israeli industry.
“Currently, there is no space program open to Israeli industry. Galileo is a significant opportunity for Israeli aerospace companies. In fact, the relevant industries consider it a vital window of opportunity. They have great competitive capability and this is virtually their only springboard to work on international space programs.”
Kan says it is not enough for commercial companies to try to participate in the project independently. “Aerospace is still a very centralized sector, run by governments with narrow commercial margins. If there is no state-sponsored umbrella organization, there is no real opportunity to develop major systems or their components.”
Kan adds that another reason for Israeli participation in Galileo is the expansion and diversification of Israeli R&D. “I estimate that 80% of Israeli R&D is in communications. This is disproportionate. Israel must plan the next decade of technology. Space can absorb considerable industrial know-how that can be linked to next generation industries. Space can take its place alongside the life sciences so that if there is a crisis in biotechnology in 15 years, we’ll be able to survive. We need a healthy balance.”
Hirsch stresses the importance of Israeli participation in Galileo. “We want to participate not only in construction, but in the steering committee as well. We want to have an influence on standards. Things go differently when you're in a management position and an Israeli company applies to participate.”
Kan adds, “If you don’t participate in the planning, design, and systems compatibility processes, you’re not in the game, and never will be. You won’t know how to hook up with the project’s systems.”
Hirsch says the revolution in GPS and/or Galileo-based location services will be as powerful as the cellular revolution.
“Globes”: How much will Israel participate in financing Galileo?
Hirsch: “Galileo is a new project. Even when we apply to participate as a third party, there are no models. You’re starting from zero. A lot of things are decided along the way.
“Even if we ask for 20% of the project, we won’t get it. EU states are holding intensive and aggressive negotiations among themselves about each country’s share in the project. That share will be basis for payment as well as the proportional share granted to each industry from a given country.”
In other words, Israeli participation in Galileo will ensure that Israeli companies will get a share of the money.
“There is a mechanism to ensure this, but it naturally requires a down payment, possibly a large one. We must conduct a cost/benefit analysis. It’s clear that participation involves private sector participation by the relevant industries, based on their own economic perspectives. Obviously, industry will have to share the cost of any financing format we receive.”
On a euro for euro ratio?
“At least. Industry might have an interest in increasing Israel’s share and will be prepared to invest more.”
Where does Galileo stand now?
“An argument has broken out between two leading EU members - Germany and Italy - each of which wants to pay more to increase its share of the project. Once the matter is settled, Spain will also want to increase its share. There are other delays, too.”
What is Israel’s standing at the moment?
Kan: “There is a green light to set up a negotiating team, an advisory board, and notify the EU that we want to participate in Galileo and hold negotiations for that purpose.”
What about indications from the EU that we’re in if we ask?
“The message is that we’re definitely worthy candidates for participating in Galileo.”
Has our late entry caused Israel any harm, since Galileo’s definition stage has been completed?
Hirsch: “I don’t think you can say that we’ve joined Galileo late. We cut corners, but we’re entering earlier than we thought we would. We haven’t passed the point of no return, i.e. the specifications for the prototype. While it would have been preferable to join 12 months in advance, rather than 18 months, there’s still room to maneuver.”
Will the IDF be involved?
“Maybe not the IDF, but the Ministry of Defense will control the advisory board, giving the perspective of the entire defense establishment.”
Published by Globes [online] - www.globes.co.il - on July 7, 2003