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Tuesday, August 26, 2014

'Erm...Brussels we have a problem' (Or "If EU did satellites..." Part III)

This week has seen the latest farcical episode in the EU's foray into space. The independent European Space Agency (ESA), which is based in Paris and is building the so-called Galileo satellite navigation system for the EU, was left with egg on its face after the two latest satellites for the system were launched into the 'wrong' orbit. In total, the project has now launched six satellites - two are in the wrong orbit and one, it emerged previously this year, isn't working.

Bad in its own right, but forgivable. We're dealing with some pretty advanced technology after all. Except, as we have chronicled before, this project has been absolutely bedeviled by unfortunate incidents, delays, infighting, poor planning and all sorts of other problems.

To re-cap:

Massive cost-overruns: The cost of completing the project and running it for 20 years (including maintenance) was under the original estimates (from 2000) €7.7 billion, of which only €2.6 billion was to be borne by taxpayers and the rest by private investors. In 2007, following the collapse of the private-public partnership, this cost had risen to € 11.8 billion, all of which was to be borne by taxpayers. In the autumn 2010, leaked information suggested that the cost had risen to a staggering €22.2 billion – again with the entire bill footed by taxpayers. But, it didn't end there…

The Commission all over the place on numbers: In 2010, Industry Commissioner Antonio Tajani denied new cost over-runs, saying “I don't know where these figures come from.” He insisted that the deployment budget (which is only part of the cost) remained at €3.4 billion (not €5 billion as the leaked info suggested). Only a few months later, in January 2011, however, Mr. Tajani and the Commission admitted that Galileo needed not just another €1.5-1.7 billion as was thought in 2010, but an extra €1.9 billion of taxpayers’ cash to cover the booming deployment cost – taking the deployment cost above €5 billion. At the same time, the Commission put the annual operation cost at €800 million (not €750 million as assumed in the 2010 estimate). This means that even €22.2 billion for deployments and running cost was an under-estimate.

Tajani has since announced what he calls “savings” of some €500 million on the huge cost overrun, but frankly, at this point we simply don’t trust any of the numbers coming out of the Commission on this one.

Taxpayers getting hammered: The cost for taxpayers for deployment plus 20 years’ worth of running cost may well have increased by some 750% - from €2.6 billion to somewhere in the region of €20 billion+. Shocking.

Delays: Originally Galileo was to be finished by 2008 – a date that was subsequently pushed back several times due to a series of delays, disruptions and other embarrassments. Between July 2005 and December 2005, the project came to a complete halt as member states and the private investors argued. According to the European Court of Auditors, these six months of doing absolutely nothing added an extra €103 million to the cost of the project. Encouragingly, the project managed to make up some time and the satellites were launched this year. However, with only three of the four previously launched working and this latest setback, the performance of this project leaves a lot to be desired to say the least.

Public-private partnership flawed from the very start: As the European Court of Auditors concluded in a damning investigation, the original public-private partnership proposal was “unrealistic” and “inadequately prepared and conceived.” Symptomatically, the private investors withdrew due to fears over the cost of the project spiralling “out of control” and that they wouldn't outweigh the benefits.

The original estimated benefits delusional: In 2006, the Commission estimated the market for Galileo as potentially consisting of 3 billion receivers and revenues of some €275 billion per year by 2020 worldwide – in addition to potentially leading to the creation of more than 150,000 high qualified jobs in Europe alone. The European Space Agency and others have estimated 3.6 billion users by 2020. These are such delusional assessments that it’s hard to know where to start. Indeed, a 2010 report from the German government admitted that "All in all, it is assumed, based on the currently available estimates, that the operating costs will exceed direct revenues, even in the long term.” And according to American diplomatic cables, released by WikiLeaks, Berry Smutny, the CEO of OHB Technology, a company that has a £475 million contract to build 14 Galileo satellites, is claimed to have said: “I think Galileo is a stupid idea that primarily serves French interests.”

The Indian, Chinese, Russian, Japanese, American markets already crowded: One of the reasons why the idea of “3 billion users” is so ridiculous is that all major players already have, or are in the process of acquiring, their own satellite navigation systems. The newly-redeveloped Russian “GLONASS” system has already been launched, and the Chinese are developing their own Compass/Beidou system (not a global endeavour, but set to deprive Galileo of revenue in China). India’s equivalent technology, IRNSS, will be operational within the next two years. Japan has one too and the US is soon to boast a new generation GPS System (though to be fair, that too seems to be delayed) – GPS being what most people happily use in Europe anyway. Where in the world is Galileo going to get its 3 billion users? Is there a better of example of how the EU is falling behind in the 'global race'?

The Chinese have nicked the frequency: In 2003, China agreed to invest €230 million in the project but pulled out after disagreements. Lo and behold, the Europeans noted that the Chinese government was a little too interested in the security related aspects of the project, and got cold feet. But only after Beijing got its hands on some very useful information. So while Galileo was falling behind schedule, the Chinese were developing Compass/Beidou. Chinese officials told the International Telecommunications Union, the United Nations agency that allocates radio spectrum frequencies for satellite use, that China plans to transmit signals on the wavelength that the EU wants to use for Galileo. In other words, the EU is now in the absurd position of having to ask China's permission to run its secure 'encrypted' signal on Chinese frequencies.

All in all, Galileo has had a sorry history right from the very start. And we suspect we haven't heard the end of it yet...


Ray said...

Well at least those responsible for setting it up and making it work can sit back and say thankfully to themselves "good job it wasn't our money" As can the unelected naked emperors in Brussels, and the so called elected parliament who compliantly let them do it all, and David Cameron who will happily let them do it again, not his money either.
On the other hand the many many thousands of unemployed can be happy that as they have no money they are not paying for it either, so it's not all bad news, is it?

Anonymous said...

Money, budgets, accountability, responsibility, democracy and waste...

Haven't we heard all of this before?

Naked emperors indeed. UK out as there is nothing to stay in for.


Anonymous said...

Some really flawed arguments in there. So all major world powers are getting their own sat nav system, and Europe should sit by and watch? This is a question of independence, the cost is almost irrelevant.

20 billion euros divided by the number of people living in the EU equals a cost of about 40 euros per person, that's a price worth paying not to be the crawling little slaves of the NSA.

And do you know of any major industrial project that was built on time and on budget? What about the Dreamliner? The F35 fighter jets? All over budget.

Anonymous said...


Please point to a successful EU project then because I cannot think of one. The EU, Euro/MananaZone, expansion of the EU empire including Ukraine have all been failures as has everything else the EU touches.


Anonymous said...

What would the GPS user know.... or for that matter care about who's GPS constellation their satnav is using?? Honestly.... Does it really matter?? Billions wasted while the EU rots in austerity measures, people are going without food and are losing their homes. Seriously, where is the perspective?

Those who are wasting money on this scale should be given the priviledge of living for 90 days on benefit and food aid.

GPS has been doen by someone else, so what? Soon we won't be able to launch anything because of the traffic jam of orbiting systems, waste and obsolete / malfunctioning systems.

If all the money wasted there had been put in to education and health then we would have a fitter more able workforce in Europe.

Of course, then the money wouldn't be going into the pockest of the politicians and their freinds and relatives that own or have investments in the companies that are wasting all the money.

Follow the money, this project is only still alive because of Pride and Profit.

Jesper said...

Classic example of what happens in large organisations (both public and private):

The ones who gets to positions of responsibility will never be held responsible. Connections got them the position, connections keep them from accountability.

And of course there's some irony here as well. The ones arguing for it to become easier to fire employees are always protected by connections and contracts from being fired, reducing legal protections would not make it easier to fire incompetents at this level.

Best case scenario? The ones responsible will receive their current salary (increased by index of course) until they are retired on full pension - while not being asked to do any further work. Compare and contrast with treatment of whistleblowers....

Bitter and/or envious? Yep :-)

Anonymous said...

I love this article!
The EU creating high-tech jobs...
That's guaranteed to work!

Those clowns can only ever make work crap that they can lby law force people in the EU to use it.
Anything that has to compete on the free global market is like the EU itself - an utter failure.

Anonymous said...

A very poorly informed article, which undermines your opinion.

Average Englishman said...

I cannot help but think that the true purpose of this wasteful project is military. The Commissars of the EUSSR still think they are creating a superstate that will of course require its own army and military infrastructure. They can't rely upon the USA as after all, they may one day be 'the enemy'.

Also, the only way I can see that any substantial revenue could be obtained for this system (if of course it is ever completed and finally made to work properly), would be for road pricing to be introduced throughout the EU with every car connected to the system. This would give Brussels a 'nice little earner' whilst at the same time moving towards the type of totalitarian control state that the so called elite of the EUSSR think is required to keep us plebs properly under control and organized.

One of the first things the Nazis did when they came to power was introduce a very efficient records system to help them with their control of those elements of the population not disposed to their ideology. Without it, they could not have been able to do such a thorough job with the Jews and other minorites they didn't like. I believe that the EUSSR would just love to have a modern electronic version of that Nazi system in place to help with their control and enforecment agenda and their satellite system is just a part of it. The introduction of an EUSSR wide identity card system is only a matter of time and after all people, as the Stasi used to say: 'if you've nothing to hide you've nothing to fear'.

So, learn to love the EUSSR or else...... and as one Anonymous blogger effectively says above: rejoice at 40 Euros well spent for every EUSSR citizen. Also, I am sure that there are plenty more such 'value for money' projects on the drawing board that our children can look forward to enjoying.

anonymous Dave said...

I believe the purpose of the EUSSR is to take as much money as possible from its citizens, put this into the hands of the unelected elite, and at the same time clamping down on everybody's freedom, with more and more regulation, which they churn out day by day, week by week.
I think that all countries should get out of the European Union. Let each country take back control of its own affairs, and lived in a harmonious arrangement which does not include everyone's hands in everybody else's pockets.