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Executive Summary TTIE NEED FOR RELIABLE INFORMATION Reliable collections of science-based environmental information are vital for many groups of users and for a number of purposes. For example, electric utility companies predict demand during heat waves, structural engineers design buildings to withstand hurricanes and earthquakes, water managers monitor each winter's snow pack, and farmers plant and harvest crops based on daily weather predictions. Understanding the impact of human activities on climate, water, ecosystems, and species diversity, and assessing how natural systems may respond in the future are becoming increasingly important for public policy decisions. Environmental information systems gather factual information, transform it into information products, and distribute the products to users. Typical uses of the information require long-term consistency; hence the operation of the information system requires a Tong-term commitment from an institution, agency, or corporation. The need to keep costs down provides a strong motivation for creating multi- purpose information systems that satisfy scientific, commercial and operational requirements, rather than systems that address narrow objectives. This report focuses on such shared systems. The five stakeholder groups in shared environmental information systems research scientists, private-sector organizations, government agencies, policy makers, and the general public have different goals and modes of operation. In particular, public-sector users (scientists, government agencies, and policy makers) generally rely on full and open access to data (i.e., data are made available without restriction for any use for no more than the marginal cost of filling a user request). On the other hand, in order to generate a financial return most private-sector organizations (for-profit producers and distributors of data and products) must restrict access to data. If the price of data increases without a 1

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2 The Privatization of Environmental Data commensurate increase in scientific value, then scientific and technical progress will decline. Nevertheless, some private-sector entities and Congress are urging government agencies to increase the involvement of the private sector in collecting and disseminating data and creating data products for public purposes. A number of government-developed satellite technologies are sufficiently mature to permit private-sector companies to enter the remote-sensing industry. Once established, however, private-sector organizations often do not want the government to compete with them by continuing to collect observations or to produce and disseminate information products. This view has been echoed by Congress in bills authorizing funding for federal agencies and in legislation forbidding agencies from competing with the private sector. These and other stakeholder viewpoints must be reconciled for the system to work. Underlying such a reconciliation should be the principle that the public welfare is best served by information systems that establish the relevant facts and enable the widest distribution to the public of facts and knowledge derived from them. Establishing the facts and distributing information are distinct functions that warrant separate consideration. Recommendation. Environmental information systems that are created by the U.S. government to serve a public purpose should continue to establish facts that are accessible to all. To facilitate further distribution these facts should be made available at no more than the marginal cost of reproduction and should be useable without restriction for all purposes. This recommendation extends the current practice of supplying most environmental data free or at marginal cost. U.S. policy (OMB Circular A-130) specifies that data should be made available at no more than incremental cost, which is slightly higher. Given the above recommendation, the question is what roles can the private sector play effectively in shared-use, public-purpose environmental information systems?

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Executive Summary THE ENVIRONMENTAL INFOR1\/IATION SYSTEM TREE 3 Environmental information systems created for public purposes can be portrayed in terms of a simple analogy an information Bee con- sisting of four parts: 1. An extensive root system that draws data from many different sources and organizations. 2. A trunk in which all available information is synthesized into a limited set of core products. 3. Multiple branches that distribute and enhance the core products into value-added products, each branch serving a distinct community of users. 4. Leaves, which represent uses of information products of the trunk and branches. Collecting measurements and developing core products are typically the most expensive parts of the information system. It is not possible for private-sector organizations to recoup these costs solely by selling infor- mation products at the marginal cost of reproduction. Because of the cost structure of public-purpose environmental information systems and the need for their scientific validity, the public interest is best served by funding the trunk and roots out of taxpayer resources, and providing full and open access to a set of reliable core products. However, the value of distributing information derived from the core products in a convenient form to as broad a group of users as possible (i.e., through the branches) has made some privately-driven value-added markets successful. Recommendation. 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. If private-sector organizations are able to provide a stable supply of high-quality data that fulfills public purposes without compromising the commercial market, then data collection in public-purpose information systems can in principle be privatized or managed through public-private partnerships. Similarly, the marketplace may provide an appropriate mechanism for deciding what value-added products are developed,

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4 The Privatization of Environmental Data although the government may have to provide them if commercial value- added products are not suitable for public purposes. The decision on public versus private funding should not be an ideological one. Rather, the choice of whether to acquire data or value-added products to meet government missions and mandates by direct funding or to purchase them through private-sector initiative must be based on sound analysis of the value of the information to the public good, likely market forces, revenues, and costs. The government should not expect the commercial market to supply data or value-added products on a full and open basis. Thus, commercial data or information products meant specifically to meet public-sector needs should be purchased and wholly owned by the government and placed in the public domain. A PROCESS FOR NEGOTIATING AMONG STAKElIOLDERS The objectives of the information system broadly constrain the roles of the five stakeholder groups. However, there is currently no recognized process for the stakeholders or their representatives to negotiate solutions that optimize common interests and minimize conflicts. Such a process is particularly important for information systems created with a mixture of public and private objectives because virtually every aspect of the system is negotiable. Issues must be resolved at the policy level (e.g., public funding of the trunk) and in the implementation details (e.g., the priorities for core products). Solutions will depend on the particular circumstances of the information system at hand. Thus, policy makers cannot expect to write a general rule that will settle conflicts for all stakeholders in all situations. Yet, finding common ground is imperative if the nation is to benefit from using environmental resources in a sustainable fashion and humankind is to face the challenges associated with their impact on the environment. Recommendation. U.S. federal agencies with responsibility for multi-purpose environmental information systems should establish a clear, visible process by which representatives of all the stakeholder groups discuss the performance and negotiate the redesign of such systems with the goal of reconciling their interests.

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Executive Summary s COMMERCIALIZATION AND PRIVATIZATION The terms "commercialization" and "privatization" are commonly used interchangeably, yet they mean different things and have different implications for public-purpose information systems. Commercialization is defined in this report to mean the financial exploitation of government data, whereas privatization refers to the transfer of government functions to the private sector. In the United States, public laws providing for unrestricted, affordable access to government data permit the coexistence of corurnercial exploitation of government data with public-sector uses, such as scientific research. As a result, commercialization maximizes the use and thus the value of data to all users. The same is not true in countries that exercise intellectual property rights over government data and thus limit the extent to which government-collected data can be used, even in international collaborations. By making it more difficult to integrate global datasets and share knowledge, such a cornrnercialization policy will fait to achieve the maximum benefits provided by inter- national collaboration and the scientific endeavor. Privatization is not without risk to the public because it involves discontinuing government functions with proven value in favor of private-sector services for which benefits may never accrue. The risks are greatest in data collection because of the potential for price increases that disrupt scientific practices or gaps in the long-term record of environmental change. Nevertheless, under certain conditions, the collection of data and/or generation of data products can be transferred beneficially from the government to the private sector. In fact, by failing to do so, the fills public benefit may not be achieved. Decisions concerning which functions should be public and which ones should be private must be made case by case. Most decisions will involve the transfer of government functions to the private sector, but some will concern re-entry of the government as a supplier. Recommendation. Before transferring government data collection and product development to private-sector organ- izations, the U.S. government should ensure that the following conditions will be satisfied: (~) avoidance of market conditions that give any firms significant monopoly power; (2) preservation of full and open access to core data products; (3) assurance that a supply of high-quality infor-

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6 The Privatization of Environmental Data mation will continue to exist; and (4) minimized disruption to ongoing uses and applications.