The European Galileo satellite location system is intended to provide a strategic navigation option that reduces reliance on U.S. management of the GPS constellation. Galileo, however, has had some teething pains, and there still is debate regarding how it will be funded and operated.

Recent presentations from the European Commission stress how Galileo will “ensure independence” for Europe for location services. During a February conference, a spokesperson noted that in 2009, “already 6 percent to 7 percent of the [European Union]’s GDP, or 800 billion euros (more than $1 trillion), relied on satellite navigation through positioning or timing applications.”

Europe is not trying to position Galileo as a complete substitute for GPS service. Instead, that same February presentation noted that the two would be complementary. In a combined GPS-Galileo structure, “the higher combined number of satellites available to the user will offer higher precision,” according to the European Commission. The combined systems also would improve signal availability in high-rise cities while providing better coverage at high latitudes, which could be a big advantage in Northern Europe.

Europe is taking a step-by-step approach towards the Galileo system. After some big schedule slippage, it now aims for an initial operational capability by 2014 or 2015 with 18 satellites, followed by full operational capability by 2019 or 2020 with 30 satellites providing all services that have been promised by the system.

On the funding side, however, there are some difficulties. We wrote in June 2010 (“Europe’s Mid-Term Galileo Review”) about questions being raised in the European Parliament regarding budget overruns. More recent reports from the legislative body call for stringent cost containment. They also identify a funding gap of 1.9 billion euros (more than $2.6 billion) to get the full system up and running and want an increase in the research budget in the short term. Parliamentarians are worried about a funding gap that needs to be closed.

On the operations side, the first part of this year has seen disagreement about how access to the Galileo public regulated service (PRS) will be managed. PRS is one of five types of services that will be provided by the system, but unlike the other public or emergency services, PRS will be reserved mainly for government-sensitive and encrypted applications.

In October, the European Commission proposed to define conditions for PRS access arrangements. This proposal has to be approved by the European Parliament and the council. There are signs, however, that they are reluctant to give the European Commission the broad range of authority it sought for itself. Both a parliament committee and the council had this item on meeting agendas at the end of March, where they agreed on a broad approach that compromises sufficiently to move the matter forward. Already in March, the Parliament was predicting it would agree to a report on the PRS situation by the end of May, followed by a plenary resolution in June.

The council and parliament have raised two concerns. First, there is a complicated legislative definition of how the European Commission handles certain key decisions and what oversight the member states or parliament have in these decisions. The core disagreement is whether the European Commission has complete discretion to set minimum standards for PRS receivers and the role of the member states in supervising these standards. A lot of work has gone into the preparation of PRS standards already. The February Galileo conference shows that work started in 2006, with the latest plans for PRS standards implementation to be finished in the 2011 to 2015 time frame.

Another issue is whether the European Commission can inspect member state implementation of PRS. The member states are reluctant to permit this degree of monitoring. Among other reasons, they do not want the European Commission in charge of rules on classified information, because this could intrude into security arrangements.

Much of this disagreement is “inside baseball” — typical squabbling in Brussels about who is in charge and what arcane rules of committee structure will apply. Nevertheless, the disagreement also points to the institutional control that Brussels will have over the Galileo system and future operations.

Gerry Oberst is a partner in the Hogan Lovells Brussels office.