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18

Conflicting International Public Sector Information Policies and their Effects on the Public Domain and the Economy

Peter Weiss 1

It is regrettably a well kept secret in Washington that the open and unrestricted policies regarding dissemination of U.S. federal government-produced, taxpayer-funded information are not based merely on abstract notions of government transparency or support for the scientific endeavor, but are based on a fundamental economic concept—information and data paid for by the taxpayers are an important input to our overall economy. The large quantities and varieties of taxpayer-funded information have been demonstrated to be important inputs in a number of industries. Economic research is somewhat sparse on this, but it is clear that the information retrieval and database industries are highly dependent on the open and unrestricted availability of government information. For example, the industry grew from $4 billion in 1994 to an expected $10 billion in 2002, and the number of database vendors grew from 900 in 1991 to 2,400 vendors in 1999. These numbers show that the Internet revolution and the ability to use government information as an input to value-added commercial products has been a significant economic boon.

Focusing on one particular sector of information, meteorological and related environmental information, we know that the weather and climate impact about a third of the gross domestic product of the United States, about $3 trillion. Many industries are weather sensitive including construction, agriculture, energy, and tourism. That has resulted in two interesting phenomena. The United States has a large and growing commercial meteorological industry. You have probably heard of the Weather Channel, which is globally unique in its size and scope. The Weather Channel can exist only because of the federal government's policy of open and unrestricted access to the taxpayer-funded meteorological information, model outputs, satellite data, surface observations, oceanic observations, and so on. There is no Weather Channel in Europe, and there are reasons for that which we will explore later.

In addition, the financial community has learned that it can assist weather-sensitive industries to hedge their risks. So, for example, if you are a natural gas marketer in the Midwest, you make more money in a cold winter and less money in a warm winter. If you run a resort on the Florida coast, you make more money when it is warm and sunny. If you are a ski resort operator, you make more money when it is cold and snowy. Your fortunes vary, depending on the conditions that occur in any given year. The financial markets now can help you hedge those risks through financial instruments commonly called derivatives, which act as insurance policies. That industry has boomed in just five years and is now a nearly $12 billion industry. The reason it can prosper is because of the


1The views expressed are those of the author and do not necessarily represent those of the National Oceanic and Atmospheric Administration/National Weather Service.



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Page 129 18 Conflicting International Public Sector Information Policies and their Effects on the Public Domain and the Economy Peter Weiss 1 It is regrettably a well kept secret in Washington that the open and unrestricted policies regarding dissemination of U.S. federal government-produced, taxpayer-funded information are not based merely on abstract notions of government transparency or support for the scientific endeavor, but are based on a fundamental economic concept—information and data paid for by the taxpayers are an important input to our overall economy. The large quantities and varieties of taxpayer-funded information have been demonstrated to be important inputs in a number of industries. Economic research is somewhat sparse on this, but it is clear that the information retrieval and database industries are highly dependent on the open and unrestricted availability of government information. For example, the industry grew from $4 billion in 1994 to an expected $10 billion in 2002, and the number of database vendors grew from 900 in 1991 to 2,400 vendors in 1999. These numbers show that the Internet revolution and the ability to use government information as an input to value-added commercial products has been a significant economic boon. Focusing on one particular sector of information, meteorological and related environmental information, we know that the weather and climate impact about a third of the gross domestic product of the United States, about $3 trillion. Many industries are weather sensitive including construction, agriculture, energy, and tourism. That has resulted in two interesting phenomena. The United States has a large and growing commercial meteorological industry. You have probably heard of the Weather Channel, which is globally unique in its size and scope. The Weather Channel can exist only because of the federal government's policy of open and unrestricted access to the taxpayer-funded meteorological information, model outputs, satellite data, surface observations, oceanic observations, and so on. There is no Weather Channel in Europe, and there are reasons for that which we will explore later. In addition, the financial community has learned that it can assist weather-sensitive industries to hedge their risks. So, for example, if you are a natural gas marketer in the Midwest, you make more money in a cold winter and less money in a warm winter. If you run a resort on the Florida coast, you make more money when it is warm and sunny. If you are a ski resort operator, you make more money when it is cold and snowy. Your fortunes vary, depending on the conditions that occur in any given year. The financial markets now can help you hedge those risks through financial instruments commonly called derivatives, which act as insurance policies. That industry has boomed in just five years and is now a nearly $12 billion industry. The reason it can prosper is because of the 1The views expressed are those of the author and do not necessarily represent those of the National Oceanic and Atmospheric Administration/National Weather Service.

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Page 130 fact that all the meteorological information, current and historic, gathered and generated by the U.S. government is openly and unrestrictedly available to the financial community to provide these specialized services. In the United States we hold as self-evident the truth that taxpayer-funded information belongs to the taxpayers. However, that truth is not broadly accepted worldwide. Indeed, the United States stands close to alone in following and advocating an open and unrestricted data policy. Some notable exceptions are Japan, Australia, New Zealand, and the Netherlands. Rather, much of the world, for example Great Britain, France, and Germany, treats its government information not as a public good, but rather as a private revenue-generating mechanism to supplement or offset agency appropriations. It has only been in the past few years that researchers and economists have been starting to think about the economic effects of open-access policies. One seminal study was funded by the European Commission. 2 For the purposes of this discussion, remember that the European Union economy and the American economy are about the same size. The European Commission study found that the United States spends twice as much money in creating public-sector information than the Europeans do in total, but the economic value to society in terms of job creation, wealth creation, and taxes is a factor of five larger in the United States than it is in Europe. The United States follows a policy that encourages, even sometimes forces, federal agencies actively to disseminate that information to all comers, so that we can have, for example, database industries, more robust publishing industries, commercial meteorology firms like the Weather Channel, or weather risk management firms that are selling new forms of insurance. European government restrictions on dissemination and use of publicsector information are thwarting the kind of economic development in these sectors that we have already seen in the United States. For example, in the United States the commercial meteorology sector totals approximately half a billion dollars annually. It includes about 400 companies employing about 4,000 people. In Europe, the commercial meteorology sector is a factor of ten smaller. Again, the European economy and the American economy are of approximately equal size. Why does this phenomenon exist? I claim it exists because European government agencies often restrict taxpayer-funded information for shortsighted reasons. An even more telling economic statistic illustrates this issue. The value of contracts issued by the weather risk management industry over the four years ending in 2001 was over $7 billion; it is now nearly $12 billion, adding nearly $5 billion in notional value in one year alone. By contrast, according to research done by the Weather Risk Management Association and PriceWaterhouse Cooper, the European weather risk management market is $720 million over the same five-year period. 3 Again, the reason for this is the difference in the public information policies of the United States versus those of Europe. European government agencies often assert copyright as well as the sui generis database protection right on taxpayer-funded information. In the United States, they do neither. A specific example is illustrative of this phenomenon. A particular firm requested the entire historic record of meteorological observations in the United States, from 1948 on, from the National Oceanic and Atmospheric Administration's (NOAA) National Climate Data Center (NCDC). Following the policies of the Paperwork Reduction Act of 1995 and Office of Management and Budget (OMB) Circular A-130, NCDC burned a stack of CDs for them, 15 gigabytes of data, and charged a little over $4,000, which covered dissemination costs, including time, effort, labor, burning the CDs, postage, etc. This same research firm requested analogous data from the German government, their entire postwar meteorological record. The German government quoted $1.5 million. The volume of the data is significantly smaller, because it is one country in Europe versus the entire United States. They also quoted 4,000 German marks, which now would be $2,500, for the historical record of only one observing station in Germany. The United States has well over a thousand, the German government fewer than 200. The interesting thing about this example is that, because this firm could not afford the German data, it did 2PIRA International. 2000. Commercial Exploitation of Europe's Public Sector Information. Final Report for the European Commission, Directorate General for the Information Society, PIRA International, LTD, University of East Anglia and KnowledgeView, Ltd. 3See also Mr. Weiss' powerpoint presentation from the symposium at http://www7.nationalacademies.org/biso/STIsymposium_Weiss.ppt.

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Page 131 without. So not only did the German weather service quote an astronomical price for their data, but they did not make a pfennig off the data because the research firm could not afford them. What is wrong with this picture? An example relating to basic scientific research paints it starkly. There is a team at the India Institute of Technology in New Delhi attempting to develop a method to predict monsoons by comparing a long series of climate model output data with the record of actual observations of the monsoons over the same time period. Whether the onset, strength, and duration of the monsoons can be predicted with any skill is a fundamental research question. The team has access to all of the U.S. model reanalysis data for a 30-year period, essentially for free from our NCDC. The European Center for Medium-Range Weather Forecasts, which is the equivalent to what we do here at NOAA, quoted the researchers a price they could not afford. The research team asked if they could get free access to use the data for this basic scientific research purpose potentially affecting the lives of over a billion people annually. They were refused. There is now an emerging realization in Europe about the benefits of open access to public-sector information. The European Commission commissioned that seminal study previously described. They have recently released two very interesting documents, one from the Directorate General for the Information Society on a more open public-sector information policy and one from the Directorate General on the Environment espousing an open policy for environmental data. 4 A draft directive on the “Re-use and commercial exploitation of public sector documents” 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 versus cost recovery pricing 5 or the question of the propriety of restrictive terms intended to control downstream uses of the information. Although 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 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 that merely describe 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. Because it would replace an existing directive, it may be adopted more promptly than the draft public-sector information directive, which is new. It is unclear, given the political realities and institutional interests in Europe, what the practical effects these documents will have, should they be adopted. But they certainly are a step in a forward-looking direction. At the national level, the Netherlands stands out as having adopted a policy for taxpayer-funded public-sector information that is very similar to the U.S. Paperwork Reduction Act and OMB Circular A-130. Indeed, much of the recent growth in the European weather risk management sector is attributable to a large group of contracts issued in the Netherlands to ensure their construction industry from weather-related risk. The reason it exists is because the Dutch government has adopted an open, unrestricted policy with regard to its historic meteorological 4Commission of the European Communities. 2000. “Proposal for a Directive of the European Parliament and of the Council on the re-use and commercial exploitation of public sector documents.” COM207. Brussels, July 5. Council of the European Union. 2002. “Common position adopted by the Council on 28 January 2002 with a view to the adoption of a Directive of the European Parliament and of the Council on public access to environmental information and repealing Council Directive 90/313/EEC.” 11878/1/01 Rev 1. Brussels, January 29. 5Office of Management and Budget Circular A130 Section 8(a)(1) defines cost pricing versus cost recovery pricing: “Agencies should . . . (c) Set user charges for information dissemination products at a level sufficient to recover the cost of dissemination but no higher. They shall exclude from calculation of the charges costs associated with original collection and processing of the information.” OMB. 1996. Circular No. A-130, “Management of Federal Information Resources,” 61 Federal Register 6428, February 20 at http://www.whitehouse.gov/OMB/circulars/a130/a130.html.

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Page 132 record and current observations. So it should not be surprising that the largest commercial meteorology firm in Europe also happens to be Dutch. By contrast, the weather risk management market and the commercial meteorological sector are relatively much smaller in Great Britain, France, and Germany. Recent economic research, most of it European, reviewed in my paper “Borders in Cyberspace,” 6 leads to some general conclusions. First, cost recovery is not the best approach to maximizing the economic value of public-sector information to society as a whole, not even from the viewpoint of government finances. Again, for example, the German weather service did not make $1.5 million by selling its historic record because the research firm could not afford it. Second, prosperity effects are maximized when data are sold at marginal cost. 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. That may sound like economists' rhetoric, but the recent research suggests it is true. In the area of atmospheric sciences, as I said, there is relatively little commercial meteorology or weather risk management activity in Europe because most European governments do not have open-access policies, resulting in data not being readily, economically, and efficiently available. Because the size of the European and U.S. economies are approximately the same, there is no reason for the European market not to grow to U.S. size with the accompanying revenue generation and job growth. A significant contributor to these disparities is a difference in information policies between the United States and Europe. Luckily there is a slowly emerging recognition in Europe that open access to government information is critical to the information society, environmental protection, and economic growth. However, the slowly growing trend toward more liberal policies faces opposition from government agencies themselves. For example, the German Parliament recently rejected a modest Freedom of Information Act. The political argument on which it was rejected was that the public has no particular right to know about the internal workings of the government. Great Britain enacted its first Freedom of Information Act in 2000. According to my colleagues in the British press, it has many loopholes, but at least they are moving in a positive direction. This concept of government commercialization and the idea of the “entrepreneurial bureaucrat”—which I claim is an oxymoron—do not succeed in the face of economic realities and under open competition policies. My paper documents a number of instances of anticompetitive practices by European government agencies. In sum, the research to date strongly suggests that open government information policies foster significant but not easily quantifiable economic benefits to society. Hence, the necessary impetus for adopting open information policies worldwide may turn on further economic research to better quantify the benefits of open and unrestricted public-sector data. That economic research should prove relevant not only to the question of governmental policies, but also to the larger questions about the value of the so-called “public domain” to society over all. 6See Peter Weiss. 2002. “Borders in Cyberspace: Conflicting Public Sector Information Policies and their Economic Impacts-Summary Report,” at http://weather.gov/sp/Borders_report.pdf.