Resolving Conflicts Arising from the Privatization of Environmental Data (2001)

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RECONCILING THE VIEWS OF THE STAKEHOLDERS 84 data, provided at public expense, it is universally accepted that the take-up has been unsatisfactory…. Further EO expenditure at current levels must be driven by more than an expression of general but unsubstantiated hope that commercial markets will be generated. It must also be accepted that there are good public policy reasons to gather EO data which cannot be expected to generate a commercial return.”11 Similarly, the U.S. Congress concluded that “commercialization of the Landsat program cannot be achieved within the foreseeable future.”12 This situation may change as the market matures. According to Geoffrey Moore, when a new technology is introduced, it follows a predictable path of marketplace adoption.13 First, a small group of visionaries who like new things and are looking for breakthroughs buys the product. The early adopters, who take on high-risk products in hopes of high rewards, soon follow. The pragmatists, who make up the bulk of the market, enter only when the products are well established and well supported. In the case of environmental information systems, scientists are the visionaries, government agencies are the early adopters, and private-sector organizations are the pragmatists. Privatization is possible when and if the chasm from early adoption to the mainstream market is crossed. Privatizing Branches Private-sector organizations may be better positioned than government agencies to identify potential applications. If a viable commercial market for the value-added product exists, it may be in the public interest to encourage private- sector organizations to create that product. Government resources could then be devoted to developing products that benefit broad and diffuse groups of users or are considered too risky for the private sector to undertake. On the other hand, if suitable commercial products are too expensive (in terms of price or restrictions), it may be appropriate for the public sector to provide the value- added product or service. Criteria for the government to 9ESYS Limited, 1997, European EO Industry and Market: 1998 Snapshot-Final Report, Prepared for the European Commission, Guildord, United Kingdom, 82 pp. 10 Presentation to a European Commission workshop, Has EO found its customers?, by S.Howes, ESYS Limited, on April 21–22, 1999. See <http://coconuds.nlr.nl/ workshop_4–99/ceo_workshop.htm..> 11 United Kingdom House of Commons, Trade and Industry Committee, Tenth Report, <http://www.parliament.the-stationery-office.co.uk/pa/cm199900/cmselect/ cmtrdind/335/33502.htm>. 12 Public Law 102–555. 13 G.A.Moore, Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. Harperbusiness, New York, NY, 227 pp. 

RECONCILING THE VIEWS OF THE STAKEHOLDERS 85 discontinue an existing product line in favor of its production by private entities include the following: • safety, that require continuing government control. • Government-funded functions (e.g., scientific research, education, government operations) would not suffer greatly from restricted access to the product. • Private-sector organizations are interested in taking over the functions of the government-funded branch. • The research and development underpinning the application is mature (i.e., there are no significant uncertainties surrounding the interpretation of the available data for the purpose at hand). • A demonstrable market that supports vigorous competition exists or is at least plausible, thereby reducing the possibility of a private monopoly. This is particularly important when the government and its affiliates would be the major customers. • Existing users would not be harmed significantly if product availability were interrupted. For example, gaps in the long-term climate record may prevent detection of rapid temperature changes, thereby hindering scientific research and environmental policy making. To avoid creating a monopolized market it is important that the following three conditions be satisfied before proceeding with privatization: (1) the prospective products are substantially differentiated; (2) it makes financial sense for separate firms to offer these distinct products; and (3) the affected market is of sufficient size to support at least two but preferably three or more firms (see Chapter 4). If a market is too immature to identify this information with any reasonable certainty, privatization may be premature. Government agencies should not feel compelled to discontinue a service that is to the public benefit simply because a commercial vendor chooses to duplicate it. Similarly, government agencies should be permitted to replicate a privatized service if regeneration can be done at an incremental cost smaller than that of purchasing full rights from a private vendor or if questions about data quality or continuity arise. Information vital to the public interest should not be “captured” by the private sector, which has economic reasons for controlling access.