EC backs $4.7 billion in funding to salvage Galileo GPS project

Satellite navigation boxes using the GPS (global positioning system) are no longer the preserve of luxury car owners in Europe. Now you see them in the humblest vehicles on the Continent's highways.

That's part of the reason why the European Commission Wednesday proposed taking on the entire €3.4 billion ($4.7 billion) cost of creating Galileo, Europe's answer to GPS, which is based in the U.S.

"Do consumers really want this product? To answer that you must ask why consumers like GPS so much," said transport commissioner Jacques Barrot at a press conference Wednesday.

"Consumers are answering the question by buying more and more GPSes," he said. "Galileo will make money, and with the E.U. as its owner, it will generate income for the E.U. budget."

Barrot's confidence wasn't shared earlier this year by the companies picked to share the cost and benefits of building the 30-strong constellation of satellites.

Unsure of the costs and unconvinced of Galileo's eventual commercial potential, the companies dragged their feet to a point in June where the Commission abandoned the partnership with the private sector.

Under the original plan, public money was supposed to pay for the first four satellites and then the private consortium of companies building the satellites were to pay for two-thirds of the 26 remaining satellites.

This amounted to a private sector cost of €2.4 billion. The companies -- AENA, Alcatel-Lucent, EADS, Finmeccanica, Hispasat, Inmarsat, TeleOp, and Thales -- were to recoup their investment costs by then operating the satellites and collecting fees once they were in operation.

Barrot said Wednesday that the Commission wants the €2.4 billion to be paid for out of European Union funds. The E.U. has already committed €1 billion to the project.

He said that he initially wanted the 27 member states of the E.U. to fill the funding gap through payments directly to the European Space Agency (ESA). But as 10 countries in the E.U. aren't members of the ESA this was dismissed, leaving the E.U. budget as the only possibility for ensuring that the project is financed.

With the E.U. as the sole owner of Galileo, it will still need companies from a variety of industries to build the system's infrastructure, Barrot said.

Astrium (EADS group) and Thales Alenia Space (Thales and Finmeccanica groups) approached the ESA for some of this work recently, the commissioner said.

"Galileo is extremely important for the strategic autonomy of Europe. We can't let this opportunity to manage the know-how in this advanced technology pass," Barrot said.

Transportation ministers of the E.U. member states will meet in Luxembourg on Oct. 2 to debate the Commission's proposal. Countries with most to gain from the project include France, Germany, Italy, and Spain. They are believed to support the Commission. However, others including the U.K. and the Netherlands, remain to be convinced that there is a real need for a European GPS.