GPS and Galileo

Date: 28/06/03

How America can learn from Europe

ONE is a state-owned monopoly, financed by taxpayers and free at the point of consumption. The other uses private finance, promotes competition and seeks payment for services rendered. So which is American and which European? Wrong. The commercial model comes from the Europeans.

The comparison is between the Global Positioning System (GPS), developed by America, and the incipient Galileo satellite navigation system being built by the European Union. America cannot understand why the Europeans feel the need to re-invent this wheel. But apart from a desire to exercise its sovereign right to maintain its independence of America in such an important strategic area, Europe also has a business case for investing over $3 billion.

A forthcoming study in Foreign Affairs magazine, led by David Braunschvig, a managing director of Lazard, an investment bank, compares the two approaches to satellite navigation. It concludes, surprisingly, that America should now emulate Europe's more commercial attitude.

The aerospace business is often unusual, but the satellite business is even weirder. GPS has become indispensable for soldiers, pilots, hikers, yachtsmen, even bankers, ever since the American Department of Defence started filling the sky with satellites about 25 years ago, in order to improve navigation for fighters, bombers and warships. More recently, GPS has allowed the development of precision-guided weapons, the smart bombs that home in on targets: between Serbia four years ago and this year's Iraq war, the proportion of such bombs used rose from no more than 3% to at least 60%.

After spending $20 billion, the Pentagon has built a global system that is a key ingredient of NATO defence. But it is also an essential prop to countless civil applications: for every military user, there are now 100 civilian users. GPS provides not only satellite-navigation systems in cars and boats; it is used by internet service providers, by banks and by surveyors. One day it might be used by air traffic control systems to permit “free flight”, in which pilots of commercial aircraft find their own route and stay clear of other aircraft, without the cumbersome business of radio telephone contact with controllers on the ground. The two rival manufacturers, Boeing and Airbus, are for once collaborating to press the case for such a system upon their governments.

America used to offer only a degraded service for non-military users, until it developed jamming systems that prevented an enemy using it against the United States. In 2000, President Bill Clinton decided to open the whole service to any user. Since there was zero marginal cost, the Pentagon had handed a gift to the world. But now GPS needs more spending to upgrade it to handle applications in which lives could be put at risk, such as in air traffic control. Mr Braunschvig argues that it is time for the Americans to re-examine how they finance GPS and to relaunch it as a commercial service.

He suggests that the Pentagon hives off the military version and develops a separate commercial system to compete with Galileo. In an emergency, they could act as back-up for each other. At the moment, the commercial services based on free access to GPS have revenues estimated at around $12 billion, with no return to the American government. In the 16th century Galileo proved both Aristotle and the Catholic Church wrong in their views of the laws of physics. How fitting that statist Europe should challenge America on its odd exception to its usual free-market rules.

Article suggests that the US GPS could learn something from the European satellite navigation system Galileo.

• Primary Source