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R 291317Z APR 08
FM USEU BRUSSELS
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INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMUC/EU CANDIDATE STATES COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
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RUEHTV/AMEMBASSY TEL AVIV

UNCLAS SECTION 01 OF 05 BRUSSELS 000651 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR OES/SAT 
DEPT FOR EUR/ERA 
 
E.O. 12958: N/A 
TAGS: ECON EIND EU EUN TSPA TSPL
SUBJECT: EU INSTITUTIONS AGREE ON GALILEO GOVERNANCE; FINAL 
POLITICAL HURDLE PASSED-RESPONSE TO C-WP7-02359 
 
¶1. (SBU) Summary: On April 22, the European Parliament 
endorsed a compromise text on the governance and financing of 
the EU's Galileo global satellite navigation system (GNSS). 
The adoption of the Regulation, which already received the 
backing of the EU member states at the Transport, 
Telecommunications and Energy Council of April 7, has removed 
the last political obstacle to the deployment of Galileo. 
The EU's GNSS will be jointly managed by the European 
Commission, the European GNSS Supervisory Authority (GSA) and 
the European Space Agency (ESA).  Its deployment phase is 
scheduled to run until 2013, at which time, the true 
exploitation of the system is expected to commence.  The 
first invitations to tender for the establishment of 
Galileo's infrastructure (including satellites and ground 
infrastructure) are expected to be issued by summer, followed 
by a review of bids and contract awards in December.  The 
compromise text provides guidance on: 
      -- Overall governance of the program, defining tasks 
for the Commission, GSA, and ESA; 
      -- Future structure of the GSA, which will include a 
reduction in staff to be moved to the Commission; 
      -- Creation of the Galileo Inter-institutional Panel 
(GIP) with representatives from the Council, Parliament, and 
Commission to perform joint oversight of the program; and 
      -- Procurement rules, defining the six main work 
packages and requirements for subcontractors. End Summary. 
 
------------------------------ 
Definition of Galileo Services 
------------------------------ 
 
¶2. (SBU) Galileo, Europe's attempt to build a competitor to 
the U.S. Global Positioning System (GPS) is designed to 
deliver five separate signals aimed at different user groups. 
 The Commission is expected to charge user fees for several 
of the signals, a key difference from GPS, which provides 
free access to all users. 
      -- The open service will be free to all users and is 
intended for high-volume satellite navigation applications, 
such as personal and automotive satellite navigation devices. 
 Resulting from an agreement in July, 2007 between the U.S. 
and the EU under the auspices of the GPS-Galileo Agreement, 
the open service will be fully interoperable with the open 
signal on the next generation GPS satellites. 
      -- The commercial service, which is expected to carry a 
usage fee, is to be used for commercial applications where 
improved performance over the open service is required. 
      -- The safety of life service is aimed at safety 
critical users, for example trains, maritime, and aircraft, 
for which stringent performance levels and guarantees of 
signal integrity are required. 
      -- The public regulated service (PRS), using strong 
encrypted signals and restricted to government authorized 
users, is intended for sensitive applications.  It is 
expected that this signal will be used in security and 
military operations.  A Commission Communication is expected 
to be released detailing the specifics of PRS later this 
summer.  (Comment: Though this likely is the signal to be 
used for military operations, the Commission stands by its 
commitment to develop a system for civil users.  As of now, 
there does not appear to be any direct inclusion of military 
requirements into the design, and that it will be up to 
individual Member States to develop Galileo applications for 
their militaries. This could change in the future as the EU 
looks for more control of security and military roles in 
Europe.  Please see the Brussels cable to be released shortly 
on European Parliament recommendations for the use of space 
assets in the European Security and Defense Policy.  End 
comment.) 
      -- The search and rescue service, part of the 
international SAR satellite system (COSPAS-SARSAT) is 
designed to detect emergency signals transmitted by beacons 
and providing location data to rescue personnel. 
 
-------------------------------- 
General Framework for Governance 
-------------------------------- 
 
¶3. (U) The public governance for Galileo will be performed, 
 
BRUSSELS 00000651  002 OF 005 
 
 
under a strict division of responsibilities, by the EU, 
represented by the Commission; the European GNSS Supervisory 
Authority (GSA); and the European Space Agency (ESA).  The 
Commission is responsible for overall management, which 
includes financial and technical audits, risk management, and 
milestones for implementation of the program. Additionally, 
the Commission is responsible for all questions related to 
the security of the systems, including oversight and 
integration of security requirements in the overall program. 
GSA will work under the supervision of the Commission, in a 
reduced form from its current organization.  ESA will, 
according to an agreement to be conducted in the coming 
months with the Commission, have responsibility for the 
management of procurement, specifically the implementation of 
the deployment phase, delivery of procurement tenders, and 
completion of contracts with the private sector. 
 
-------------------------- 
GNSS Supervisory Authority 
-------------------------- 
 
¶4. (U) Under the provisions of the agreement, GSA will 
continue to exist and act under the supervision of the 
Commission.  GSA was originally created to act as the 
oversight body between the European Community and industry 
during the existence of the public-private partnership. 
However, since the EU took full control of the program, the 
various institutions have debated whether or not GSA should 
continue to exist as an entity, and if so, what should the 
new functions entail.  Under the agreement, GSA will be 
responsible for: 
      -- Galileo security, to include the implementation of 
security procedures and system security audits; 
      -- Preparation of the commercialization of Galileo, to 
include market analysis; and 
      -- Other tasks entrusted to it by the Commission, which 
could include promotion of Galileo applications and services 
 
¶5. (SBU) Officials from DG Energy and Transport (TREN), the 
Commission's home for the Galileo Unit, indicated to USEU 
EconOff that GSA will be cut approximately in half over time. 
 As of now, GSA employs approximately 45 staff, but this 
number will slowly be reduced to approximately 20 to handle 
the above tasks.  The other 25, primarily engineers and 
technical staff, will be transitioned over to the Commission 
under the Galileo unit to handle implementation of the 
program.  As of now, there are several GSA employees sitting 
in Commission spaces and performing Commission functions 
without having been officially transferred. The transfer of 
GSA employees and the expected hiring of several new staff 
likely will mean that within DG TREN, the Galileo unit will 
be elevated to the rank of a Directorate with a single 
Director responsible only for Galileo. 
 
--------------------------------- 
Galileo Inter-institutional Panel 
--------------------------------- 
 
¶6. (SBU) As part of the process, the European Parliament in 
particular has demanded more control and oversight of the 
Galileo program.  However, many in the Commission and the 
Council have been very wary of providing too much control to 
Parliamentarians, most of whom have little technical 
expertise, and as such, oversight of all technical details 
could substantially slow the process or lead to irrational 
decisions.  The compromise that was reached was the formation 
of the Galileo Inter-institutional Panel (GIP).  The 
Commission is required to take into account the views 
expressed by the GIP, though it is not clear how much 
authority the GIP will have over Commission decisions.  Three 
Council member, likely to be Member State Transport 
Ministers; three Parliamentarians; and one Commission member 
will make up the seven person oversight panel.  Though it has 
not yet been decided who will serve on the GIP, DG TREN 
representatives have ensured USEU EconOff that the U.S. will 
be notified as soon as possible, to allow for the possibility 
of meetings with senior U.S. GPS officials.  The role of the 
GIP is to meet up to four times a year to follow closely: 
-- Progress on the implementation of GNSS programs, in 
 
BRUSSELS 00000651  003 OF 005 
 
 
particular with regard to implementation of procurement and 
contract agreements; 
-- International agreements with third countries; 
-- Preparation of satellite navigation markets; 
-- Effectiveness of governance arrangements; and 
-- Annual review of the work program. 
 
------------------------------------ 
Export Control of Galileo Components 
------------------------------------ 
 
¶7. (SBU) With control of the overall program, the Commission 
is looking for ways to exert its influence over export 
control aspects of the Galileo technological development. 
Several Commission members have indicated they still are 
frustrated by the sale of rubidium clocks from Swiss company 
Temex to China.  The Commission has competence of the 
management of dual-use regulations, most of which are 
structured exactly after those of Wassenaar, and which are 
then binding to the member states.  As many of the components 
of Galileo could be considered dual-use, these could fall 
under existing regulations.  However, since DG TREN is 
concerned that this has very little actual strength, it is 
taking two further steps: 
-- During the current revision of the EU's export control 
process, the Galileo program is working to add 
Galileo-specific items. Additionally, the EU is making 
strides to develop coherency among the Member States, 
processes so that consistent rules are applied across Europe. 
 In the process, using sanctions-based inspiration, the EU is 
developing lists of countries which there are substantial 
restrictions to export.  DG TREN hopes to ensure that China 
is included in these lists, providing an impediment to 
technology transfer. 
-- During the Galileo contract process, the Commission 
intends to enter language into the contracts to place strict 
requirements on the companies related to the sale of 
components developed specifically for the Galileo program. 
 
¶8. (SBU) A DG TREN representative indicated to USEU EconOff 
that the Commission is already speaking with Switzerland and 
Norway, members of ESA but not of the EU, to make clear what 
rules will be applied to their companies during the 
contracting process.  The goal is to ensure that technology 
is not transferred outside of Europe, specifically to China, 
that could place Europe at a disadvantage in GNSS development. 
 
------------------- 
Galileo Procurement 
------------------- 
 
¶9. (U) According to the agreement, Galileo procurement will 
be applied according to the EU's public procurement rules, 
which give equal opportunity to all bidders, as well as 
opportunities for third country involvement.  Specifically in 
the case of Galileo, the following rules will be applied: 
-- Infrastructure will be split into six main work 
packages--system engineering support, ground mission 
infrastructure completion, ground control infrastructure 
completion, satellites, launchers, and operations; as well as 
a number of additional work packages; 
-- Competitive tendering of all packages, and in the case of 
the six main packages, one bidder may bid for the role of 
prime contractor for a maximum of two of the six main work 
packages.  Note that only European companies can bid for the 
role of prime contractor on the six main work packages; 
-- Satisfy the EU's requirement for small and medium 
enterprise (SME) involvement; least 40% of the activities to 
be subcontracted must be performed by companies which are not 
prime contractors of any of the six main work packages; and 
-- Use of dual sourcing wherever appropriate to avoid 
long-term dependence on single suppliers. 
 
¶10. (SBU) The time frame for contracting still is fluid, but 
initial calls for tender could be released as early as the 
first week of May to as late as the end of June.  This will 
take place in two phases, with the first phase calling for an 
expression of interest from companies planning to bid on the 
main work packages, and the second to take place in the early 
 
BRUSSELS 00000651  004 OF 005 
 
 
fall, the official call for proposals. These calls are 
expected to close shortly thereafter, with decisions made in 
December, 2008.  (Comment: At least one DG-TREN 
representative is pessimistic that any major decisions will 
be made this year, and that he expects the time table to slip 
into early 2009.  End comment.) 
 
¶11. (SBU) The procurement rules, combined with Commission 
intentions, provide several opportunities for U.S. companies 
to be involved in the process.  The SME requirement does not 
specifically call for the involvement of small and medium 
enterprises, only that companies which have not been named 
prime contractor for one of the six main work areas be 
involved in the subcontracting responsibilities.  As only the 
prime contractor roles, as well as those that have a security 
component, are limited to European companies, third country 
companies can become part of consortia in the bidding 
process.  This allows for large U.S. companies to act as 
subcontractors and count in favor of the 40% threshold, a 
possible benefit to European bidders during the tendering 
process. 
 
¶12. (SBU) Under a specific heading, that of launchers, DG 
TREN representatives have indicated an interest in using U.S. 
launch vehicles to fulfill some of the satellite launches. 
This is primarily security related.  According to DG TREN, 
given the existing U.S.-EU Security Agreement, there are no 
security barriers to allowing Galileo satellites to be 
launched from U.S. soil.  This does appear to be a concern in 
the cases of Russia and China, where Europe would be required 
to give up control of the satellite for a period of time, and 
given the sensitive nature of some of the components, this is 
not a favorable scenario. 
 
--------------------------- 
Third Country Relationships 
--------------------------- 
 
¶13. (SBU) With the new governance structure, the relationship 
with third countries has the potential to change.  As Galileo 
becomes more of a reality, it is clear from discussions with 
Commission representatives how important is has become to 
Europe to deploy a full constellation, particularly ahead of 
China's Compass system, but possibly also before Russia fully 
replenishes its own Glonass system.  Europe is very concerned 
that if it falls to fourth in the race to deploy a full GNSS 
constellation, it will lose some of the strategic and 
economic benefits it hopes to gain.  To that end, DG TREN 
officials have explained that the relationship with China is 
quickly changing, as Europe now views China as a competitor. 
However, as contracts still exist between GSA and China, 
there will still be some level of cooperation, most notably 
in the form of Galileo applications using the open signal, 
but neither in the development of the satellites themselves 
nor in the use of encrypted signals.  China will also not be 
permitted to have engineers co-located in GSA offices. 
(Note: Israel's role, from its involvement in the Growing 
Galileo conference held last fall, appears to be similar to 
China's in the development of applications to Galileo open 
signals. End note.)  As mentioned earlier, the Commission is 
very concerned that any technology transfer, such as the 
Temex clocks sold to China, will enable China to make strides 
in its own system, possibly to the detriment of Galileo in 
the long-term.  (Comment: Temex has explained to the 
Commission that the clocks it sold to China were of a 
"degraded quality," but there has been no explanation of what 
that means.  The Commission is not convinced that the clocks 
are anything but very close to full quality. End comment.) 
 
¶14. (SBU) Now that the negotiations among the EU institutions 
have been completed, the Commission is prepared to continue 
cooperative efforts with the U.S.  Most notably, the EU is 
most interested in discussions pertaining to the GPS-Galileo 
Cooperation Agreement, up for review in 2008.  In response to 
questions about the ratification of the agreement by the 
individual Member States, DG TREN explained that the Council 
posed a question in March to each Member State asking if the 
EU can enforce provisional application of the agreement, even 
though the Netherlands, Belgium, the UK, Ireland, and Cyprus 
 
BRUSSELS 00000651  005 OF 005 
 
 
have not formally ratified.  The Commission has not yet 
received a response, but should provide a written response to 
the U.S. when all member capitols have responded. 
 
MURRAY 
.