EADS Astrium entered uncharted territory this month in accepting financial backing from the European Space Agency (ESA) to build a new high-speed data relay service for Europe while simultaneously creating a market for it.

Astrium has taken privatization of satellite communications and remote-sensing services further than anyone else in the business, showing a willingness to spend hundreds of millions of its own euros with little or no government backing.

But David Chegnion, vice president of business development for Astrium Services, says the public-private partnership agreement inked Oct. 4 with ESA to build, test, launch and operate the new European Data Relay Satellite (EDRS) system is different.

“We are pioneering a new service and a new market,” Chegnion says.

Under the terms of the agreement, ESA is to provide Astrium €275 million ($374 million) toward establishing an EDRS system. Development of the service's two payloads—EDRS-A, which will piggyback on the Eutelsat 9B commercial communications satellite; and EDRS-C, to fly on a yet-to-be-built bird—is estimated at nearly €400 million. Operational transmissions are scheduled to begin in 2014, ending reliance on non-European ground stations for the reception of data from Earth-observation satellites, a potential threat to European independence. Current transmissions of Earth-observation data are limited to the times when satellites fly over ground stations.

Although Astrium has no customers yet for EDRS, Chegnion is quick to point out that ESA and its industrial partners have an anchor tenant for data relay services in the European Commission's Global Monitoring for Environment and Security (GMES) project, which is expected to launch its first two satellites in the next couple of years.

Funding for GMES maintenance and network operations, however, is still being hashed out within the EC, which in July signaled its intent to eliminate GMES from the forthcoming multi-year funding plan that begins in 2014. If implemented, GMES would be left to rely on voluntary funding contributions from individual EU member states to pay annual operations and maintenance costs estimated in excess of €800 million.

Beyond GMES, Chegnion sees a market for EDRS among national militaries in Europe in need of Earth-observation services. “We are targeting the next generation of national military satellites or commercial Earth-observation satellites,” Chegnion says. “That could include meteorological satellites or commercial Earth-observation satellites.”

Rudi Schmidt, head of ESA's satellite telecommunications department, says the time is right to pursue a public-private partnership for EDRS.

“The advantage we have is the combination of technology that is ready and GMES [as an anchor tenant],” Schmidt says. EDRS is the fourth public-private partnership the agency has negotiated over the past several years, he notes, adding, “Admittedly, this is the most complicated one.”

Previous partnerships include development of the Hylas-1 telecommunications satellite, under which ESA subsidized construction of an advanced telecom payload built by Astrium Satellites and launched on Hylas-1 last year by start-up satellite operator Avanti Communications of London. Avanti, a publicly traded company, is slated to launch its second Hylas spacecraft next year with no ESA involvement.

Another public-private venture aimed at helping European satellite manufacturers compete with established U.S. giants like Boeing and Space Systems/Loral is Alphasat, a satellite in development for mobile satellite services operator Inmarsat. Featuring a payload financed by ESA, it is slated to launch in late 2012 or early 2013.

The agency's third foray into public-private partnerships involved Germany's Small GEO platform, an ESA-subsidized development that gives German Space Agency DLR its own prime contractor in the small telecom satellite market. OHB Technology, based in Bremen, Germany, is building the Small GEO platform and has contracted with Spanish communications satellite operator Hispasat to launch the Hispasat AG1 in 2013. OHB is also expected to sign a contract soon with Astrium Satellites to build the EDRS-C spacecraft. Separately, OHB is negotiating with DLR to construct Heinrich Hertz, a telecommunications research satellite that would feature advanced Ka-band broadcast technologies.

It is too soon to gauge whether ESA's use of public-private investment schemes is panning out. But Schmidt and Chegnion are confident EDRS as envisioned will succeed.

“It's inconceivable that we will build and launch the satellites and nobody will operate them,” Schmidt says. “I think this will not happen in the end.”

But if it does, Chegnion says Astrium will work with ESA to find a solution.

“We do not see it as a possibility that the European Union would not need this service, so we are committed with ESA to develop EDRS,” he says. “In the unlikely event that the program with the European Commission and GMES does not happen, we will address that jointly with ESA.”