While congress debates the size and direction of proposed budget cuts, a potential massive supply of income remains untouched after 28 years of operational excellence – the American Global Positioning Satellite System. A design and engineering miracle that emanated from the Cold War, GPS continues to freely grant the fruits of Yankee engineering, technology and know-how to everyone on the planet. However, like any gift of value, this contribution has a price; an expense that could be put to great use in these trying economic times. Surely, the GPS system is costly to Americans in many different ways; however, this article will examine only the financial expenditure, lost revenue and national impact from governmental oversight.
The Cost
Throughout this article “cost” is defined only as the dollars attributable to all aspects of the GPS system. In subsequent writings, the corporate, individual and national detriments will be examined, but for now it’s just the raw dollars.
- Initial Costs – In a Rand Corporation Report the total R&D cost for the system was $14.1 billion in 1995 dollars ($20.23 billion in 2010.) Furthermore, the same report indicates that the total launch cost of the satellites was $3.71 billion ($4.48 billion adjusted). R&D on the EELV is $2 billion and while impending launch figures are not available this article assumes the same $4.48 billion dollars for future launches through 2020.
- Continued Maintenance – According to James Madison University’s Spatial Information Clearinghouse, the estimated annual cost to operate the system is $750 million; however, EU data assigns a maintenance budget of €830 million ($1.14 billion) annually to their Galileo project.
- Upgrades – A US government General Accounting Office (GAO report) states that Lockheed Martin received “…$3.68 billion, for 8 block 3A satellites.” Meanwhile, Boeing has spent $1.599 billion “…for development of [8] 2F satellites” still to be completed. The report also states the US government plans to spend an additional $5.8 billion on GPS improvements over 5 years.
Additionally, the Rand study estimates future costs through 2020 will be $15.1 billion. If we assume no inflation, construction cost overruns or increase in launch fees, the additional maintenance ($7.5 billion) and launch costs ($4.48 billion) to 2020 set the total GPS price tag at $87.66 billion.
- $20.23 billion Initial R&D
- $4.48 billion launch through 1995
- $2.0 billion EELV R&D
- $1.6 billion for 25% of phase 2 upgrades ($6.4 billion total)
- $3.68 billion for 25% of phase 3 replacements ($14.72 billion total)
- $750 million annual maintenance cost from 1994 to 2011 ($12.75 billion)
- $15.1 billion future procurement costs (2020)
- $7.5 billion maintenance (2020)
- $4.48 billion estimated launch (2020)
TOTAL = $87.66 billion
Revenue
However, there is a more sinister cost to the program that is often overlooked. The GPS system is used commercially by both American and foreign companies in global shipping, freight, communication, entertainment, airlines and commercial transportation in general. Without implementing a fee for service the US government is losing a large revenue stream for a product paid for by American taxpayers. This loss of revenue, in effect, becomes a cost for the ongoing enterprise.
According to a European Commission report released on January 11, 2011, the EC “estimates $1 trillion in European [commerce] depends on satellite navigation” and GPS World editor Alan Cameron estimated “that the corresponding figure for the global economy lies close to $3 trillion annually,” in a December 2010 editorial. Price Waterhouse Cooper declares, in a Business Plan developed for Phase II of the Galileo satellite program, Europe "...will see income generated" from several sources:
- “We conclude…the potential of generating revenue from chipset royalties….”
- “Revenue generation…through providing…Galileo signals via a cellular network….would be ongoing ‘service revenue’ as opposed to the one-off nature of…royalties.”
- "We believe that users…might be willing to pay…for….authentication” service.
- Generate revenue by “…imposing a levy on the sales of all GNSS terminals.”
- “€12m per annum would be recovered [from]...European commercial airlines."
This same report places the non-aviation benefit to EU member states at €15.1 billion in 2003 euros ($24.8 billion in 2010 dollars). The data also indicates a total non-aviation net income of 490 million Euros ($671 million) annually by 2019. Next, the results include income from the European commercial aviation sector valued at €12 million net ($16.43 million) and while the report recognizes revenue from other transportation sources it does not estimate a value for them. Therefore, this article assumes the same annual value ($16.43 million) for commercial shipping, trucking, inland waterways and railroads as for aviation. Thus, the EU expects to generate $703.8 million annually from their GPS system by 2019.
Conclusion
It is very important to remember, the figures used by Price Waterhouse Cooper are net (after annual maintenance and deployment cost in 2019); therefore, their total revenue is actually much larger. If we assume the same values for the USA, the potential untaxed gross revenue is in excess of one billion dollars each year.
Since former President Ronald Reagan authorized the free, unrestricted civilian and commercial use of America's GPS system for all nations and industries, the USA has lost $19.1 billion in revenue. Extrapolating this value to 2020, the dollar cost exceeds $26.2 billion. Furthermore, the EU data is net, which by definition means the $87.66 billion the USA did and will spend on GPS is replaced with a $26 billion profit – a $114 billion dollar swing.
Frank W. Hardy - Frank has 36 years of airline experience navigating every ocean & continent. Flying 25,000 hours in 42 years presents a rare historical ...
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