Georg Aichholzer/Herbert Burkert (eds.), “Public sector information in the digital age: Between markets, public management and citizens' rights,”
Cheltenham: Edward Elgar Publishing (forthcoming 2004).
Borders
in Cyberspace:
Conflicting
Public Sector Information Policies and their Economic Impacts
Peter N. Weiss
ABSTRACT:
Many nations are embracing the
concept of open and unrestricted access to public sector information --
particularly scientific, environmental, and statistical information of great
public benefit. Federal
information policy in the US is based on the premise that government
information is a valuable national resource and that the economic benefits to
society are maximized when taxpayer funded information is made available
inexpensively and as widely as possible.
This policy is expressed in the Paperwork Reduction Act of 1995 and in
Office of Management and Budget Circular No. A-130, “Management of Federal
Information Resources.” This policy actively encourages the development of a robust
private sector, offering to provide publishers with the raw content from which
new information services may be created, at no more than the cost of
dissemination and without copyright or other restrictions.
In other countries,
particularly in Europe, publicly funded government agencies treat their
information holdings as a commodity to be used to generate revenue in the
short-term. They assert monopoly
control on certain categories of information in an attempt – usually
unsuccessful -- to recover the costs of its collection or creation. Such
arrangements tend to preclude other entities from developing markets for the
information or otherwise disseminating the information in the public interest.
The U.S. government and the world scientific and environmental research
communities are particularly concerned that such practices have decreased the
availability of critical data and information. And firms in emerging
information dependent industries seeking to utilize public sector information
find their business plans frustrated by restrictive government data policies
and other anticompetitive practices.
Disclaimer: The views expressed are those of
the author and do not necessarily represent those of the U.S. National Oceanic
and Atmospheric Administration.
I. Introduction
Many nations are embracing the concept of open and
unrestricted access to public sector information -- particularly scientific,
environmental, and statistical information of great public benefit. Federal information policy
in the US is based on the premise that government information is a valuable
national resource and that the economic benefits to society are maximized when
taxpayer funded information is made available inexpensively and as widely as
possible. This policy is expressed in the Paperwork Reduction Act of 1995 (U.S.
44 Code Chapter 35) and in Office of Management and Budget Circular No. A-130,
“Management of Federal Information Resources.” (1996). This policy actively encourages the development
of a robust private sector, offering to provide publishers with the raw content
from which new information services may be created, at no more than the cost of
dissemination and without copyright or other restrictions.
In other countries, particularly in Europe, publicly
funded government agencies treat their information holdings as a commodity used
to generate short-term revenue. They assert monopoly control on certain
categories of information to recover the costs of its collection or creation.
Such arrangements tend to preclude other entities from developing markets for
the information or otherwise disseminating the information in the public
interest.
In the US, open and unrestricted access to public
sector information has resulted in the rapid growth of information intensive
industries particularly in the geographic information and environmental
services sectors. Similar growth has not occurred in Europe due to restrictive
government information practices. As a convenient shorthand, one might label
the American and European approaches as ‘open access’ and ‘cost recovery’,
respectively. The cost recovery model is now being challenged on a variety of
grounds:
·
Economists
argue that the benefits to the American Treasury that accrue from corporate and
individual taxes from the secondary publishing and service activities
stimulated by open access policies far exceed any revenues that might be
generated through cost recovery policies;
·
Cost
recovery policies often mean that budgetary constraints prevent some government
agencies from acquiring information that has already been created or collected
by another part of government, resulting in agencies either doing without or
using inferior alternatives;
·
No
one supplier, public or private, can design all information products required
to meet the needs of all users in a modern information-based economy. Private
sector intermediaries are increasingly important players in the rapidly
developing information economy;
·
European
information service providers are increasingly frustrated at the competitive
advantages enjoyed by their American counterparts;
·
A
recognition that efforts to build transnational data sets, be they
meteorological or environmental (where serious problems have already arisen),
statistical or cartographic, are hampered by national agencies bent on
preserving intellectual property to pursue local cost recovery policies;
·
A
growing understanding of the wealth creating possibilities (‘prosperity
effects’ in the words of one Dutch study) that arises from a common information
base (e.g. US street mapping) or software standard (e.g. the World Wide Web).
This report examines fundamental differences in the
policy and funding models for public sector information (PSI) in the US as
compared to Europe. The following figure illustrates these differences.
This
report seeks to demonstrate the economic and societal benefits of open access
and dissemination policies for public sector information, particularly as
compared to the limitations of the “cost recovery” or “government
commercialisation” approach.
It focuses primarily on the conclusions of recent
economic and public policy research in this area, as well as examples of failed
or limited cost recovery experiments in the US and Europe. Emerging European
thinking on the issue of government competition with the private sector, and
recent developments at the European Commission level and in selected European
countries are briefly summarized.
II. Recent Research
The
economic potential of public sector information has only recently begun to be
recognized in the economics and public policy literature. Recent research, much
originating in Europe, documents the effect that governmental information
policies have on the economy in general and on particular sectors.
The Potential of European Public Sector
Information
The European Commission’s Directorate General for
the Information Society commissioned a study from PIRA International on the Commercial Exploitation of Europe’s Public
Sector Information. (PIRA 2000).
The PIRA study attempts to quantify the economic potential of public
sector information in Europe and the extent to which it is being commercially
exploited, and suggests policy initiatives and good practices. Although some of
the qualitative data had to be extrapolated, the study should be sufficient to
persuade policy makers of the need for serious rethinking of European
information policy and its high priority.
PIRA states:
“Cost
recovery looks like an obvious way for governments to minimize the costs
related to public sector information and contribute to maximizing value for
money directly. In fact, it is not clear at all that this is the best approach
to maximizing the economic value of public sector information to society as a
whole. Moreover, it is not even clear that it is the best approach from the
viewpoint of government finances. […] Estimates of the US public sector
information market place suggest that it is up to five times the size of the EU
market.”
The PIRA study
went on to observe that the fledgling European market would not even have to
double in size for governments to more than recoup in extra tax receipts what
they would lose by ceasing to charge for public sector information. The problem
is that these positive macro-economic effects are masked by the adaptation of
European markets to cost recovery policies, by which both individual agencies
and partner publishers have grown adept at extracting monopoly rents from
captive markets to their own benefit but to the detriment of the economy at
large. Furthermore, as the study noted with understatement:
“The concept of
commercial companies being able to acquire, at very low cost, quantities of
public sector information and resell it for a variety of unregulated purposes
to make a profit is one that policymakers in the EU find uncomfortable.”
The money involved is
significant. PIRA distinguished between
government
investment in public sector information (“Investment Value”) and the value
added by users in the economy as a whole (“Economic Value”). Economic Value
could not be directly obtained, so aggregated data was used. PIRA estimated the
Investment Value of public sector information for the entire European Union at
9.5 billion EURO/year. The Economic Value was estimated at 68 billion EURO a
year. By comparison, the Investment Value for the United States is 19 billion
EURO/year and the Economic Value is 750 billion EURO/year. To summarize:
Economic Potential of PSI in Europe and US
|
||
|
In EUROs |
EU |
US |
|
Investment value |
9.5 billion |
19 billion |
|
Economic value |
68 billion |
750 billion |
This contrast points to both opportunities
and challenges for European companies and their governments. PIRA’s main
conclusions are:
·
Charging for public
sector information may be counter-productive, even from the short term
perspective of raising direct revenue for government agencies;
·
Governments should make
public sector information available in digital form at no more than the cost of
dissemination;
The fledgling EU market would not even have to double in size for governments to more than recoup in extra tax receipts what they would lose by ceasing to charge for public sector information
;
Governments realize two kinds of financial gain when they drop charges:
Higher indirect tax revenue from higher sales of the products that incorporate the public sector information; and
Higher income tax revenue and lower social welfare payments from net gains in employment.
Prosperity
Effects of Open Access Policies
A
study commissioned by the Dutch Ministry of the Interior examined both
qualitative and quantitative prosperity effects of different pricing models for
public sector information (Berenschot 2001): no cost, marginal cost and full
cost recovery. Its main conclusions:
Prosperity effects will be maximized when data is sold at marginal cost. Marginal cost is defined as all costs related to the dissemination of public sector information. This includes shipping, promotional costs, personnel and information technology costs.
·
Enormous
additional economic activity can be expected by extrapolating the study’s
results to all public sector information.
Resolving
Conflicts Arising from the Privatization of Environmental Data
A U.S. National Academy of Sciences study which examined the
practices of commercialized government agencies in Europe and experiences with
privatization of environmental data in the US concluded:
“…[c]ountries
that exercise intellectual property rights over government data…limit the
extent to which government-collected data can be used, even in international
collaborations. By making it more difficult to integrate global data sets and
share knowledge, such a commercialization policy will fail to achieve the
maximum benefits provided by international collaboration in the scientific
endeavor.” (National Research Council 2001)
For example, basic research on monsoon prediction at the India Institute of Technology is hampered by the unaffordable prices for historic atmospheric model data from the European Centre for Medium-Range Weather Forecasts. As a result, the researchers are not able to integrate the European data with freely available US data. (Goswami, et al 2001)
Thus, the Academy
recommended:
·
Environmental
information created by government agencies to serve a public purpose should be
accessible to all. To facilitate further distribution, it should be made
available at no more than the marginal cost of reproduction, and should be
usable without restriction for all purposes.
·
The
practice of public funding for data collection and synthesis should continue,
thereby focusing contributions of the private sector primarily on value-added
distribution and specific observational systems.
Economic Benefits of Open Access Policies for Geographic
Information
A study commissioned by the
private sector members of the Dutch Federal Geographic Data Committee attempts
to quantify the economic effects of open access policies for spatial data. (Ravi Bedrijvenplatform
2000). The main conclusions are:
·
Consumers
as well as private business can profit significantly from freely accessible
public sector information;
·
Growth
potential for the geographic information industry: lowering the price of public
sector geographic data by 60% would lead to a 40% annual turnover growth plus
employment growth of approximately 800 jobs. Companies that pay a much lower
price for public sector information will invest these savings in the
development of new products, thereby expanding the potential market.
Policy Comparison in the Dissemination of Spatial Data
A North American-European
comparative study on the impact of government information policies, which
focused on databases from national mapping agencies (Lopez 1998), concluded that:
·
A
direct association exists between pricing and its effects on public access and
commercialization of government agency information. Current pricing problems
are having a deleterious effect on the affordability of spatial data in Canada,
France, and the United Kingdom;
·
A
direct association exists between the application of intellectual property rights
and the degree of public access and commercialization of government agency
information. The greater the restrictions on access, the less successful
dissemination programs will be;
·
Reducing
prices and relaxing intellectual property restrictions on government datasets
are significant factors improving opportunities for access and
commercialization for stakeholders in the geographic information community.
The Impact of Database Protection Legislation in Europe
A study prepared for the
Canadian government examined the European Database Directive, which does not
exclude governments from using the database protection right and gives European
governments an extra argument for cost recovery policies. (Maurer 2001). Therefore,
its findings are important in the debate on public sector information policies:
·
During
its first year, the new protection right seems to have produced a one-time
boost in database production and the number of new firms entering the industry.
Since 1999, however, growth rates have returned to previous low levels.
·
The
European database protection regime has also produced side effects (“negative
externalities” in economic parlance) including:
o
Excessive
protection for certain databases (e.g. phone directories, environmental
observations);
o
New
barriers to data aggregation;
o
New
opportunities for dominant firms to harass competitors with threats of
litigation;
o
Increased
transactional gridlock due to so-called “anti-commons” effects; and
o
Inadvertent
impediments and disincentives for non-commercial database providers, e.g.
universities and other research institutes.
The Economics of Meteorological Information
John
Zillman, Director of the Australian Meteorological Department and John
Freebairn of the University of Melbourne recently performed extensive
theoretical research on the economics of meteorological information (2001;
2002, 2002a). Their main conclusions
are:
Direct government funding and free provision to all are favored with their contribution to national welfare maximized at the point where marginal benefits equal marginal costs.
“Private and Mixed Goods” (i.e. “value added”) meteorological services are most economically produced and provided through market forces.
Comparing Weather risk management and commercial meteorology
markets in the US and Europe
The Weather Risk Management Association, representing an emerging economic sector which uses weather and climate data to mitigate commercial risk, commissioned PricewaterhouseCoopers to study the rapid growth of this industry. (PricewaterhouseCoopers 2002) The study shows that the weather risk management industry is booming in the United States (9,696 million USD in contract value in 5 years ending March 2002) compared to the small European market (721.3 million USD in the same 5 years) .
Notional Value by Contract Coverage Period and
Region, All Contract Types ( in thousands of US Dollars)
|
||||||
Coverage Period
|
North America
|
Europe
|
Asia
|
Australia
|
Other
|
Total
|
1997
|
169,410
|
0
|
0
|
0
|
0
|
169,410
|
1998
|
1,835,238
|
320
|
0
|
0
|
300
|
1,835,858
|
1999
|
2,882,423
|
70,690
|
4,360
|
0
|
1,689
|
2,959,162
|
2000
|
2,409,185
|
49,329
|
45,067
|
2,523
|
10,541
|
2,516,645
|
2001
|
2,400,000
|
90,000
|
90,000
|
25,000
|
1,190,001
|
4,306,000
|
Total
|
9,696,256
|
721,339
|
139,427
|
27,523
|
1,202,530
|
11,787,075
|
A
comparison of US and European commercial meteorology activity also illustrates
a significant disparity. The prosperous commercial meteorology activity in the
US has resulted in a tenfold difference in the number of firms, revenue, and
job creation. (Commercial Weather Services
Association, Association of Environmental Data Users of Europe).
|
Commercial
Meteorology in the US and Europe |
||
|
US$ |
US |
Europe |
|
Gross
receipts |
400-700
million |
30-50
million |
|
Number
of firms |
400 |
30 |
|
Number of employees |
4000 |
300 |
Given
that the US and EU economies are approximately the same size, the primary
reason for the European weather risk management and commercial meteorology
markets to lag so far behind the US is the restrictive data policies of a
number of European national meteorological services.
III. Government Competition with the Private Sector – What
is the Appropriate Role of Government?
The
larger public policy issue behind public sector information policies is whether
or not commercial government activities that compete with the private sector
are proper for a government agency funded primarily by the taxpayers. In 1995,
European national meteorological services prevailed in the World Meteorological
Organization on the issue of replacing the organization’s previous policy of
full and open exchange of meteorological information with a procedure (WMO
Resolution 40, CgXII), which sanctions charging and use restrictions on broad
categories of data. In the words of the National Academy’s “Privatization”
study, summarized above:
“The
change of policy was aimed at preventing private sector entities from competing
with national meteorological services in Europe, which recoup costs through
sales of data and services… WMO Resolution 40 substantially decreased the
amount of data member nations made freely available (National Research Council
2001).
Three
recent examples illustrate the Academy’s point.
In Switzerland,
a commercial meteorology firm alleged that the Swiss national meteorology
office was engaging in price discrimination by offering discounted, nominal
prices to its own commercial arm. The Swiss competition authority held:
“Anyone
engaging in the sale of meteorological [data] as well as providing sovereign
activities, is acting as an independent party in the commercial process and, as
a public undertaking, is subject to the provisions of the Antitrust Act…In the
Swiss market, [the Swiss Meteorological Institute] has a market-dominating
position. It must make available to interested third parties on a
non-discriminatory manner all the data and products which it uses for its own
services.”( Swiss Competition Commission 1998).
In Germany,
the leading news magazine Der Spiegel (2001) recently published an
expose of the German meteorological service, Deutscher Wetterdienst (DWD). It
claimed that the DWD was also engaging in price discrimination in an attempt to
drive its newly emerging commercial weather service “competitors” out of
business. DWD was said to be offering completely produced and ready to air
weather forecasts to television and radio stations at prices equal or lower
than charged the commercial meteorological firms for the raw data on which to
base their competing broadcast forecasts. According to atmospheric sciences
professor Dr. Michael Sachweh of the Ludwig-Maximilians University in Munich:
“This
is for sure no fair competition… The commercial companies are pushed to the
wall.”
In
an apparent attempt to drive commercial weather companies out of business, the Finnish
Meteorological Institute (FMI) deliberately degraded its radar images
between June 1999 and December 1999 when delivering them to the Scandinavian
Composite consisting of radar images for Finland, Sweden and Norway, which is
sold to private sector commercial weather services. The degraded radar images
contained false radar signals (“clutter”), which users mistook for rain. In its
own operations, the FMI used the high-quality radar observations.
The
Finnish Competition Authority found that the FMI abused its dominant position
in the national meteorological data market and recommended an infringement fine
of FIM 200,000 (33,500 Euro) on the FMI for its breach of competition
legislation. To remedy this situation, the Finnish government has announced
plans to separate and privatise the commercial arm of FMI as a self-sustaining
private sector entity without government subsidy, and retain its “public
purpose” functions in a taxpayer funded government agency subject to open data
policies. (Finnish Competition Authority 2001).
In addition to Finland, two other European countries
are actively reconsidering the wisdom of such policies and practices.
In Sweden,
the Agency for Administrative Development’s (Statskontoret) seminal report “The
State as Commercial Actor” identified a range of issues associated with
government entities entering the commercial field and the effects on the
private sector (2000). For example, they found that the National Land Survey:
·
Had
an unfair competitive advantage over emerging commercial firms;
·
Was
the dominant player in the geographic information market;
·
Is
the “preferred” provider in the market due to its “official” status;
·
Has
access to taxpayer-funded “strategic infrastructure”, including government
owned information technology assets;
·
Has
copyright and other rights over public sector data;
·
Is
partly funded by taxpayer Kronor and enjoys monopoly rents from other entities;
·
Obscures
the demarcation between government and private activities.
In
light of these findings the Statskontoret recommended that the commercial arm
of the National Land Survey be completely privatised, subject to open public
audit and oversight, and its data holdings placed in the public domain for
access by the general public and competing private sector entities.
As
follow-on to “The State as Commercial Actor,” the Statskontoret was asked to
examine the operations of the Swedish Meteorological and Hydrological Institute
(SMHI), and has reached similar conclusions. (Statskontoret 2002). It recommended that the commercial functions
of SMHI be split off into a private corporation, and the essential government
functions of SMHI be retained in a government agency with an open and
unrestricted data policy. The study
went one step further by recommending that the practice of “cross-subsidization”
of SMHI by “assignment” work from other government agencies should cease.
Validated requirements of agencies responsible for roads, fisheries, forestry,
etc. would either be put out to bid, or would be designated as inherently
governmental and specifically authorized to be performed by SMHI under direct
appropriations. The Statskontoret
recognized, as argued elsewhere in this paper, that transfer payments from
other government agencies have usually been counted by national meteorological
services as part of their “commercial” revenues, and touted as part of their
success at “commercialisation.” An
effective date for the separation of SMHI into private and governmental arms
has yet to be established.
In the
Netherlands, the Ministry of Economic Affairs published a report on unfair
government competition with the private sector in the specific context of
public sector information. (1997). The
main conclusions were:
·
Public
sector databases should be made available to third parties on a
non-discriminatory basis at uniform prices;
·
The
public sector should not make unnecessary modifications to databases to create
unfair competition. In other words, information services directly linked with
the “public task” are allowed, and all other (commercial or “value added”)
services are forbidden;
·
Additional
(commercial) information services may only be provided by the public sector
when there is a public need for such services, and no private sector company is
already providing that service and it is unlikely that any private sector
company is going to pursue it in the near future.
Based
on this report, the Dutch government separated the commercial arm from the
Dutch Royal Meteorological Institute into a commercial entity.
The
Swedish and Dutch studies agree generally with consensus views in the US, which
are restated by Stiglitz, et al., “Role of Government in a Digital Age”
(2000). The Computer and Communications
Industry Association commissioned Nobel Laureate and former chair of the US
Council of Economic Advisors, Joseph Stiglitz, to analyse the role of
government in a digital age, with particular emphasis on public-private
competition issues through a number of agency case studies. With regard to the
National Weather Service partnership with the private sector and the balance
between public and private roles, the report concluded: “The National Weather
Service seems to strike this balance well.”
An
opposite viewpoint remains prevalent among commercialised European government
agencies, particularly among national mapping and meteorological agencies. It
has been articulated formally in the United Kingdom, where Ministries
actively encourage government bodies to develop value-added services charged at
market prices:
“All government bodies will
be free to offer value added products and services providing this is done in a
transparent manner in a level playing field among all market participants
(2000).”
We agree, however, with the central conclusions of both the
Swedish and Dutch governments that a level playing field without unfair
competition and cross subsidization is impossible in the case of government
agencies providing both commercial and public interest services. Two recent
significant experiments in the UK will test this conclusion.
In
December 2001, the UK government preliminarily decided to transfer the entire
Ordnance Survey from a “Trading Fund” to a government-owned public limited
company (PLC) with the government owning 100% of the shares. By contrast, in
Sweden (land office and met office, SMHI), the Netherlands (met office, KNMI)
and soon Finland (met office, FMI), the approach is privatization of the
"commercial arm" while retaining the "public interest" arm
in the government. The belief in Sweden, Holland and Finland is that the basic
observing systems and the official forecasts and warnings generated from their
data are inherently governmental, as are the public interest mapping and land
registration functions of the Swedish land office. This approach inevitably
leads to an open data policy since the new "spin off" will need to
fend for itself against competition, and the only way to guarantee a
"level playing field" is through an open data policy.
In
the Ordnance Survey situation, as pointed out by the Swedish Statskontoret in
the context of the analogous Swedish agency, if the entity performs both
governmental and commercial functions it will tend to have a natural monopoly
position due to economies of scale and other factors, and will continue to need
infusions of taxpayer funds (even if under contract rather than as a direct
appropriation) as "commercial" revenues will not be adequate to fund
the "public interest" aspect. If this is accompanied by the right to
control the underlying data, funded in part by the taxpayers, healthy
competition from other private entities and the overall growth of that economic
sector will be impeded.
Using
a different model, the UK Met Office has recently entered into a joint venture
with private sector interests to create a new entity, Weather Exchange Ltd.,
which will carry out the functions of the Met Office’s commercial arm, and seek
to develop and market a range of value added products. The private interests
will contribute capital and staff, and the Met Office will contribute data and
staff. Outstanding questions are whether this new entity will have any of the
competitive advantages cited by the Swedish Statskontoret in the context of
publicly owned commercial entities, and whether the Met Office will adopt a
completely open data policy. How these questions are answered will determine
whether the commercial meteorology and weather risk management industries in
the UK begin to expand, and at what rate.
Iv. Failed Examples of Cost Recovery in the United States
There have been a number of examples of failed cost
recovery experiments in the United States at both the Federal and State levels,
which demonstrate concretely the practical effects of restrictive data
policies.
·
The
“Automated Tariff Filing and Information System” (ATFI) was created by
the US Federal Maritime Commission (FMC) to collect, manage and disseminate
data on tariffs filed by common carriers, including information on cargo types,
shipping destinations and service contract terms. In November 1992, Congress
passed the “High Seas Driftnet Fisheries Enforcement Act,” Public Law 102-582,
which included a requirement that FMC collect user fees from anyone directly or
indirectly accessing ATFI data. The goal was to raise $810 million over three
years by charging 46 cents per minute to retrieve the information directly or
indirectly. However, the actual user fees collected were $438,800, which was
only 0.05% of the original mandate (GAO 1995). This dramatic failure can be
attributed to (1) optimistic assumptions about the perceived inelasticity of
tariff data, and (2) failure to consider the possibility that users may obtain
tariff data from other sources.
·
The
United States Geological Survey (USGS) in the early 1980’s attempted to
move towards cost recovery by increasing prices for data products including
maps. As a result, demand dropped so precipitously that the USGS was forced to
quickly reduce prices to recapture the previous market. After reducing the
charges to previous levels, sales took three years to return to their earlier
level. After this failed attempt towards aggressive cost recovery, the USGS
struggled for several years to find a balanced method to recover dissemination
costs, suggesting that recovering dissemination costs only is not always easy.
USGS has recovered close to 100% of its dissemination costs for the past 4 years,
which they now realize is the practical upper bound of cost recovery.
(Blakemore and Singh 1992).
·
A
spectacular example of the failure of cost recovery for data comes from the State
of California. (National States Geographic Information Council 2001). California encouraged State level agencies
to charge fees to local levels of government within the state for products
derived directly from base data provided by these same local levels of
government. This cost recovery policy resulted in several problems. First, some
local governments could no longer afford to pay for the same products they once
obtained at no cost, leading to a disincentive for these local governments to
continue providing updated data to the State. Second, some local governments
retaliated against the State-level agencies by charging their own user fees.
While the State of California has since returned to the “free” system, some
local governments continue to charge user fees. Now, due to local government
assertion of intellectual property rights, the State cannot include information
in public documents obtained from local governments that charge user fees for
that information. This has led to incomplete datasets, and State regional plans
have a “swiss cheese” appearance, with some areas containing significantly more
detail than others. These incomplete and internally inconsistent maps can be
particularly troubling during public emergencies when complete, accurate, and
easily accessible data is essential. Recognizing the failures of cost recovery
policies, California has begun to move towards a statewide open data policy.
·
A tale of two counties. An unintended controlled experiment in cost
recovery was performed by two counties in Wisconsin. Clark County adopted a
cost of dissemination policy for its digitized aerial photographs (digital
orthophotos); and Brown County adopted a full cost recovery policy for its
identical products. The inexpensive data in Clark Co. led to widespread use by
individuals who might not otherwise have even tried using the data. People
invested in CAD/GIS software and availed themselves of the County data for a
broad range of applications. People got "hooked" on using the data
and kept coming back for more. The contrast with Brown County was striking. The
cost recovery pricing did not discourage a small number of specialized users
such as professional surveyors or others who have site-specific projects where
only one section or two of data was needed. However, those needing much larger
areas, e.g. entire townships or cities, were deterred by the high pricing. As
the county program manager stated:
“Some of the responses from people requesting data
is, ‘I can't afford that! That blows the entire budget for this project’. So
they choose not to buy ANY of the data, hang up the phone, and generally go
away with a bad taste about the entire program. I don't think we're generating
much support this way. When people choose not to use our data because it is too
expensive, what are the implications? Most people who want to use the data are
doing something to the land which affects the community that we all live in.
Without good, accurate data, are these people able to make the best decisions?
I've seen it from both sides of the fence, and I plan to work on revising our
policy.”(DuMez 2001).
V. Limitations on cost recovery in Europe
We believe the perceived benefits of cost recovery
have generally been overstated by commercialised European government agencies.
The following five examples support this point:
·
The
Deutscher Wetterdienst (DWD) the German national meteorological service,
was reorganized in a statute, effective in 1999, that explicitly authorized its
commercial activities with a mandate that it minimize reliance on general state
funding. In addition to data sales, it
was also authorized to produce and market value-added products in direct
competition with the emerging commercial meteorology sector, and directed to
set its prices for such products at a level adequate to fully recover all
costs. However, an audit report issued
by the German Federal Accounting Office (Bundesrechnungshof), shows that this
cost recovery policy has not met expectations (Bundesrechnungshof 2000). In
spite of consulting assistance, DWD has
been unable to set up an adequate cost accounting system. Data sales recover less than 1% of total
expenditures. The report finds that
without significant new revenue sources, for example new charges on regulated
aviation users of meteorological data, DWD will not achieve its statutory cost
recovery mandate. A more recent report (Bundesrechsnungshof 2002), disclosed
that DWD’s prices for value-added products were set at a level that could
potentially recover only 40% of costs.
The Ministry which oversees the DWD noted that competitive pressures in
the market for value-added products would likely preclude price increases. In sum, DWD has not generated significant
income from data sales or sales of value-added products. It has yet to minimize
the expenditures that are not covered by income and decrease the burden on the
general budget. Given the failure of
cost recovery, the German Parliament should consider replacing the present
statutory scheme with one in which public good services, i.e. data generation
and general public forecasts and warnings, are funded by appropriations; and
value-added services for specialized users and sectors, e.g. road
transportation, construction, agriculture, broadcasting, are provided by a
competitive private sector.
·
The
Ordnance Survey (OS) of the United Kingdom was chartered as a
semi-independent Executive Agency in 1990, and is required to maximize its
reliance on revenue from customer entities. However, OS does not approach full
cost recovery. Of the £100 million annual OS revenues, only £32 million comes
from commercial product sales. The remainder comes from other central, regional
and local government departments and agencies as well as from entrenched usage
of large scale maps by the recently privatized utilities. These remaining
revenues cannot reasonably be characterized as “commercial”, but rather are a
combination of monopoly rent and reallocation of public money from one public
sector ledger to another, with no net benefit to the taxpayer or the Treasury.
·
Similarly,
the UK Meteorological Office gets 50% of its “commercial” revenue as a
transfer payment of taxpayer funds from the Ministry of Defence, and reportedly
another 20% of its revenue from other UK government agencies. The Met Office recently decided to make
significant categories of basic observational (surface) data available for free
due to negligible revenue from data sales and a growing recognition of the
benefits of open access policies.
·
The
European Centre for Medium-Range Weather Forecasts is losing private
meteorology firm customers for its operational model outputs due to
unaffordable prices required to be charged by the national meteorological
services which control it on behalf of member states. The emerging European
commercial meteorology industry is rapidly taking advantage of increasingly inexpensive
computational capacity and wide-bandwidth transmission capabilities to run
their own localized versions of freely available US atmospheric models, and are
acquiring typically three orders of magnitude more data from the US than from
the ECMWF for the provision of initial and boundary data for these models and
in support of general forecasting.
·
Meteo-France is among the most secretive (French taxpayers cannot
obtain access to the details of its expenditures and revenue sources under
existing freedom of information law) and aggressive (only one French commercial
meteorology firm has been identified) of the European meteorological services.
A recent WMO report disclosed, however, that Meteo France has come to an
understanding with the French treasury that it would endeavour to achieve a
cost recovery rate of 10% of its total expenses. (WMO 2001). Beyond data sales, this presumably includes
revenue from specialized value-added products for broadcasting and individual
clients. In addition, it has established a separate office “Meteo-France
International” to encourage developing nations to emulate its government
commercialisation and restrictive data policies.
VI. Other recent
developments
European Union
·
Following
up on the work by PIRA International, discussed above, the European
Commission’s Directorate General for the Information Society is championing a
draft Directive on the “Re-use and commercial exploitation of public sector
documents.” The scope of the draft
Directive is quite broad, encompassing most public sector data and information
not otherwise protected due to privacy or security considerations. It urges more transparency in the pricing
practices of member states’ agencies, but does not tackle the issue of
dissemination cost pricing vs. cost recovery pricing, or the question of the
propriety of restrictive terms intended to control downstream uses of the
information. While weak in these areas,
the draft directive does seem to have significant support both at the
Commission level and, perhaps more significantly, in the European Parliament.
·
A draft Directive from the
Directorate General on the Environment on public access to environmental
information could have a more significant short-term impact on European agency
practices. It contains a strong
definition of covered environmental information which extends to most
information about the environment, including meteorological data quite
specifically. The definition is
significantly more specific than the 1990 environmental information Directive
it is intended to replace, which European meteorological services have
construed as being limited to information relevant to environmental regulatory
enforcement, and not to meteorological, climatological or other data, which
merely describes the state of the environment.
Most importantly, it sets a cost of dissemination standard for the
pricing of this information which would preclude cost recovery pricing for
data. It too is essentially silent
regarding restrictions on downstream use.
This draft environmental information Directive is also garnering
significant support in the European Parliament, and since it would replace an
existing Directive may be adopted more promptly than the draft public sector
information Directive which is new.
The Netherlands
·
Three
documents under consideration in the Lower Chamber will impact the policy
framework for making government information available in the new millennium.
The plan “Towards the optimum availability of government information”, has
developed an ambitious agenda, and declares that government information must be
easily and widely accessible and available. It contains a clear analysis of the
judicial framework concerning the use of government information. As far as
effectivity is concerned, the plan has a certain degree of “try not to step on
anyone’s toes” especially in the category of “remaining information.”
·
The
Netherlands completed a comprehensive policy review under its Electronic
Government Action Programme, “Towards Optimum Availability of Public Sector
Information.” This brings the information policies of the Netherlands into
close harmony with those of the United States. However, implementation may be
less than smooth. The policy objective pursued by the Action Programme is to
ensure that public sector information is as widely accessible and available to
citizens as possible. First, citizens need that information in order to
participate in the democratic process. Secondly, the economy will benefit from
public sector information being made available in an open and unrestricted
manner. The Action Programme expressed concern that public sector bodies had
been reserving copyright and database protection rights on a large scale, and
that this was contrary to the spirit of Dutch FOI law. It proposed that no
license fee should be charged for the use of public databases, and that
copyright and database-right required conditions should only be set for
external use to protect the public interest and third party rights.
·
The
“Government and Markets” Directive (1998), specified that public sector
databases could be made available to third parties only on a non-discriminatory
basis and at uniform prices. It also indicated that the public sector should
not make unnecessary modifications to databases to create unfair competition.
This report led to the separation of the commercial arm of the Royal
Netherlands Meteorological Institute (KNMI) in 1999 as a limited liability
corporation (no public sector employees) into a company called Holland Weather
Service. Since then, the Dutch government has implemented the following
policies:
o
Stepwise
designation of all meteorological data as “essential” under WMO Resolution 40;
o
Adoption
of an “open and unrestricted” data dissemination policy with charges limited to
distribution costs only.
United Kingdom
·
The
UK government has accepted the general principle of providing government data
at marginal costs.
·
However,
Trading Funds, e.g. the Ordnance Survey and the Met Office, are specifically
excluded from this principle. In general, trading funds have the most
interesting public sector datasets when it comes to opportunities for the
private sector and the scientific and research communities. The Trading Funds
are, however, to “improve” (i.e., make transparent) pricing and dissemination
policies.
·
A
trend within the UK towards making basic data available is illustrated by a
freedom of information law that was enacted in November 2000 and will be
implemented starting fall 2002. However, a counter trend towards increasing
commercialisation of government agencies still exists, particularly in the
cases of the Ordnance Survey and the Met Office, discussed above.
·
Financial
targets for Trading Funds are set by the Treasury, and reflect the cost of
assembling data, not its value. The problem this creates is illustrated by the
decision to make 2001 Census Data free of charge when it became clear that
public sector bodies wouldn’t budget to buy the data, which costs £250 million
to assemble.. In addition, the UK Meteorological Office is now openly disseminating
categories of meteorological observations which are of potentially great public
benefit, but which did not generate significant revenue for the agency.
Finland
·
The
1999 Publicity Act provides for a general right of access to legally defined
administrative documents created, sent, or received by a government agency,
including electronic records, on condition that the document is in the public
domain. A public authority can collate various databases and make them
available. Data from various public sources can be combined and reused. The
authorities also are to promote public access to information and they are
expected to pro-actively publicize their activities and to ensure all relevant
documents are readily available.
Germany
·
No Federal freedom of information law exists in Germany, but one
is being considered. As regards access to public sector information, an official statement
on the intent of the law under consideration is that, ‘People should be able to
access original documents at any time on-line and perform transactions which
are important for their daily lives with the administration via the Internet.
The public authorities need to make increasing use of the technical
possibilities now available to make their administration work transparent for
everyone.’ However, data policies and commercial reuse of government
information do not seem to be under consideration.
·
In
July 2001, a potentially significant competition case in the information field
arose in Germany. (The Economist 2001). The European competition Commissioner
ordered the German company IMS Health to license its geographical “brick”
system to competitors due to abuse of its dominant market position. The
“bricks” are geographic grids that break down countries and cities into meaningful
geographical units for analysing public health related geographical patterns
e.g. doctors’ prescriptions, drug sales and public health trends. In the view
of the Commissioner, the “bricks” constitute a de facto industry standard in
Germany, also known as an “essential facility” in antitrust law, and for there
to be fair competition IMS health must license its copyright on reasonable
terms. The decision, which is being challenged in German courts, indirectly
implicates the question of what types of public sector information may form an
“essential information infrastructure”. In short, is compulsory licensing of
essential government databases on equitable terms necessary to foster a
competitive private sector information industry?
VII. Conclusions
·
The
consensus of recent research is that charging marginal cost of dissemination
for public sector information will lead to optimal economic growth in society
and will far outweigh the immediate perceived benefits of aggressive cost
recovery. Open government information policies foster significant, but not
easily quantifiable, economic benefits to society.
·
Over
the long term, the cost recovery goal of European governments’
commercialisation approach cannot succeed, because:
o
The
private user base that can be charged is not large enough to support recovery
of the full costs of a comprehensive, unsubsidized information service;
o
Charging
other government users merely shifts the expenses from one agency to another
rather than actually saving the national treasury any money;
o
Due
to some of the fundamental economic characteristics of information (high
elasticity of demand, public good characteristics) one must question whether
any governmental entity can successfully raise revenue adequate to pay not only
for the dissemination of its information but also for the costs associated with
creating the information for governmental purposes in the first instance.
o
High
prices for information ultimately lead to predatory and anticompetitive
practices, like price dumping, and the creation of government owned
corporations or joint ventures with preferred private sector entities that may
serve to exclude others from the market.
·
The
most sensible solution is to separate commercial activities into truly
commercial entities separate from the government and adopt open access
policies. Separation of commercial activities would be the basis not only for
an open market in accordance with European competition law, but also guarantee
market structures with maximum overall economic potential.
·
Some
government agencies are willing to liberalize their policies, but fear that
they will suffer budget consequences. Therefore, the relevant government
Ministries must come to understand that open data policies will create wealth
and tax revenues more than adequate to offset the short term “losses,” and that
they need to fully fund agency information activities.
In sum, recognition is slowly emerging in Europe
that open access to government information is critical to the information
society, the scientific endeavor, and economic growth. However, recent trends
towards more “liberal” policies face opposition. This comes from treasuries as
well as from entrepreneurial civil servants in charge of “government
commercialization” initiatives, who are sometimes tempted to engage in
anti-competitive practices. Therefore, these issues require consideration at
the highest policy making levels of government.
Recognizing the scale of the opportunity presented,
and the speed of enabling technological change, the US and the EU should commit
to move forward together to take the practical steps necessary to establish
internationally harmonized open and unrestricted data policies for all public
sector information.
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