Borders in Cyberspace: Conflicting Government Information Policies and Their Economic Impacts
U.S. National Weather Service
What does “borders in cyberspace”1 mean? Everybody knows that there are no borders in cyberspace. Cyberspace has completely eradicated all national borders. Anybody, anywhere can get information and do anything with it. Right? Not quite!
Let us take the true case of an atmospheric researcher in India fascinated by a problem that affects over a billion people—monsoons. The prediction, with some level of skill, of the onset, duration, and severity of the cyclical monsoons would greatly benefit society. Researchers have developed a number of analytical techniques using computers that allow some understanding of the coupled earth, ocean, and atmosphere system. To develop a method to predict monsoons the researcher develops a hypothesis that integrates American and European daily global atmospheric model output results for the past 30 years into a large global database. Those observations are compared to actual observations of what the monsoons have done over the past 30 years to tease out some trends and evidence that might allow the prediction of monsoons, which could benefit literally billions of people. This is pure basic research; no one yet knows whether it is possible to predict the monsoons.
To conduct this basic research the researcher contacted the U.S. National Climatic Data Center and got access to 30 years of model output data essentially for free. The Indian researcher then contacted the European Center for Medium-Range Weather Forecasting in England and requested data for the same approximate 30-year time period. However, the European Center as an E.U.-chartered organization is required to charge the researcher for access to these data. The researcher did not have adequate funding and now has to attempt to do this research with the U.S. data only.
The Indian researcher just hit a border in cyberspace, a border between two policy domains. Geographic borders are decreasing in importance, while borders between “policy domains” (e.g., the rules and practices associated with the access to and ability to use scientific, environmental, statistical, and other data) are becoming increasingly important.
For additional information, see 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.
U.S. PUBLIC INFORMATION POLICY
It seems to be a well-kept secret in Washington that the U.S. policy of open and unrestricted access to taxpayer-funded government-generated public information is not based solely on abstract notions of democratic principles, such as open government and transparency. Rather it is also based on an economic understanding that the information generated by the single largest information generator—the government—is an important input, just like gas, coal, or water, to the economic process. The United States holds as a matter of both economic and political principle that “government information is a valuable national resource, and . . . the economic benefits to society are maximized when government information is available in a timely and equitable manner to all.”2
The roots of this policy run deep. The sources of U.S. information policy include the 1976 Copyright Act, the Freedom of Information Act (FOIA), the Paperwork Reduction Act, the Electronic FOIA Amendments of 1996, and the Office of Management and Budget Circular No. A-130. Information generating agencies of the U.S. federal government, including the National Oceanic and Atmospheric Administration, the National Aeronautics and Space Administration, the U.S. Geological Survey, the Department of Agriculture, the National Institutes of Health, the Census Bureau, the Bureau of Labor Statistics, and all others, follow the same information policy, which is to actively disseminate all taxpayer-funded public information without any restrictions or conditions and without the assertion of copyright or database protection regimes.
The United States does not have a sui generis database protection regime nor is it likely to have any such regime in the near future. U.S. government agencies are forbidden to charge more than the cost of dissemination for the information and they are urged to take advantage of private and academic channels of information dissemination. Agencies are encouraged to use the best available technology, including the Internet and the World Wide Web.
Taxpayer-funded government information is an important economic input. The database and information retrieval industries in the United States are large and have grown exponentially since the beginning of the Internet revolution. They are dependent to a great extent on free, unrestricted, taxpayer-funded government information, which covers everything from economics to statistics to agriculture to the weather.
Approximately one-third of the U.S. economy, and likely most nations’ economies, particularly in developing countries, are weather and climate related. Every sector of the American economy has some sensitivity to the weather, and firms that cater to that sensitivity have developed in the United States. Firms cater to other sensitivities as well. For example, the United States has a very robust geographic information industry that one does not see in many other countries.
Weather and climate information, and utilization and exploitation thereof, is a partnership in the United States. The government works very closely with the research community. The advances in critical engineering and analytical techniques that the researchers in India are seeking to use in their research on monsoons are dependent upon both academic and governmental support.
At the same time we have in the United States a number of interesting ventures involving the private sector and the media. For example, the U.S. company The Weather Channel has no counterpart in Europe. I suspect that “borders in cyberspace” is one of the reasons.
DIFFERENT MODELS FOR FUNDING PUBLIC-SECTOR INFORMATION
There is an interesting bureaucratic philosophical difference between information policy in the United States and in Europe (see Figure 17.1). The U.S. model says that if the mission of the Environmental Protection Agency, National Oceanic and Atmospheric Administration, National Institutes of Health, or U.S. Geological Survey is to create information, then that information should be made available to the users, who are taxpayers and contributed to the cost of generating the information in the first place, to do with as they will. The users in turn will generate jobs, income, new business, and new industry using the information.
Office of Management and Budget Circular. 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.
This differs from the European concept of public-sector information. In Europe the funding structure is different from that of the United States. In general, European treasuries and legislation force agencies to go “off budget” and find their own funding. Often agencies charge users for use of their data and information. These users can be other government agencies and academics, and are not limited to “commercial” users. This leads to “government commercialization,” which occurs when government agencies charge the public for information services that were previously considered “public goods” and were financed by tax revenue. This trend is also known as cost recovery. Government commercialization should not be confused with privatization, where functions that are not inherently governmental (e.g., utilities, telephone services, airlines) are transferred to the private sector.
When thinking about the economics of information, it is important to remember that information is not a normal good in the economic sense. Basic laws of supply and demand work differently in the information world. Information is nonrival and nonexclusive; that is, information is a public good. While information has high initial fixed costs of generation or collection, it has generally low reproduction costs.
Only in the last couple of years has the economic community started to study these very issues. It should be noted that the economies of the European Union and the United States, for the sake of this discussion, are approximately the same size in terms of gross domestic product. The United States spends approximately twice as much of taxpayer dollars on the development of public sector government-funded information as the European Union. The return on that investment, in terms of commercial growth, job growth, and taxes paid to the treasury per dollar, is approximately five times larger in the United States than in Europe.
Why is that? My hypothesis is that the United States actively encourages the dissemination and use of that information in commerce, academia, and the media, while in Europe they do not. PIRA International recently conducted a study commissioned by the European Commission’s Information Society that examined the potential of public-sector information in Europe.3 They found that charging for public-sector information might be counter-
productive, even from the short-term perspective of raising direct revenue for government agencies. They also noted that the fledgling E.U. information market would not even have to double in size for the government to recoup in extra tax receipts that they would lose by ceasing to charge for public-sector information.
As previously mentioned, one-third of the U.S. economy is weather sensitive. For example, an energy firm selling natural gas makes more money during a cold winter; during a warm winter they make less. A beach resort in Florida makes more money when the weather is warm and sunny; if it is cold and rainy, they make less. A ski resort in the mountains makes more money when it is clear, cold, and snowy; when it is overcast without snow, the ski resort makes less. In the United States someone interested in hedging their weather risk can purchase financial instruments from various companies.
The United States has a booming weather risk management industry compared with the smaller weather risk management industry in Europe, much of which is in the Netherlands. The Netherlands has adopted an open data policy for its meteorological information, both present observations and their historical data, but France, Germany, and Great Britain have not. As such, not only is there an economic disparity between the United States and Europe but there also exists an economic disparity within Europe based on data and information policies. This is another border in cyberspace.
In the August 2002 issue of the German popular geography and natural history magazine Geo, there is an article that discusses information policy. Geo claims that the commercial meteorology industry in the United States is 10 times the size of the counterpart industry in the European Union due to differing data policies regarding information as an economic driver.
A researcher in Great Britain who was developing a major international global database on weather and climate approached the U.S. National Climatic Data Center for all the U.S. historic weather observations from 1948 to the present. He received 15 gigabytes of data, for which he paid $4,200. The researcher made the same request of the German Weather Service, which quoted him 1.5 million DM (over a half-million U.S. dollars) for the historical data of all of Germany and 4,000 DM for the historical record of only one weather station. Because the researcher could not afford the data, he did not buy them. The German Weather Service did not sell the data, and thus did not make any money. The problem lies in the bureaucratic tendency to use government assets to attempt to raise money but without the incentive structure of true private-sector firms. Government commercialization is extremely tempting to bureaucrats, particularly to officials in national treasuries.
The United States has attempted on numerous occasions, at both the federal and state levels, to create user charge regimes for public sector data and information. Those attempts have failed because of the basic economics of information, public goods, nonexclusivity, and the inability of governments to act truly as businesses.
Europeans are starting to figure this out. European treasuries are still pushing European agencies quite strongly to engage in cost recovery. Many European agencies get transfer payments from other government agencies, and therefore consider themselves to be self-supporting. For example, 50 percent of the U.K. Meteorological Office’s revenue comes from the Defence Ministry and another 30 percent from other government agencies. This is essentially an accounting transfer from one government account to another government account.
The German Weather Service recovers only approximately 1 percent of its costs from data sales. It was embarrassed when the federal audit office realized that not only did it not account for its costs adequately but it also created a price structure that put it in violation of German competition law when it came to dealing in the private sector. That helps explain why there are very few commercial weather services in Europe.
Cost recovery is not the best approach for maximizing the economic value of public-sector information to society as a whole, not even from the viewpoint of government finances. Prosperity effects will be 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. There is a growing recognition in Europe that public-sector data policy is critical to the information society. I hope the World Summit on the Information Society will discuss this topic comprehensively.
Recent trends towards more “liberal” policies still face opposition from national treasuries and entrepreneurial civil servants in charge of government commercialization initiatives, which can result in anticompetitive practices that hinder the growth of private-sector competitors. A tension thus exists. There are two European Commission directives on public-sector information and environmental information that are under consideration and relate to this concept.4 Both directives recognize that public-sector information is economically important, both generally and in the area of the environment. These directives are grappling with the two major issues: (1) pricing policy and the cost of dissemination and (2) the downstream uses of information and the restrictions on such uses. There have been some reforms at the national level in Great Britain, the Netherlands, Sweden, Finland, and Germany.
The United States is not alone in terms of open information policies; Australia, Canada, New Zealand, and Japan have open policies as well. Some other countries have not addressed this issue, although China is currently studying its information policy.5
Global data sets are needed to predict large-scale phenomena, such as the monsoons studied by the Indian researcher. Other projects also highlight the importance of information access to development. For example, a weather radio network being set up in rural Africa called RANET is a pilot project in six countries that will assist farmers by providing accurate weather information.
Information is worthless unless it is provided to villages when they need it and how they need it. The World Bank also is thinking about weather risk management in a broader context, particularly in global agriculture, as illustrated by the first international weather risk management contract that was issued to ensure the Moroccan sunflower crop.
Commission 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; and 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.
See Chapter 18 of these Proceedings, “Recent Developments in Environmental Data Access Policies in the People’s Republic of China,” by Liu Chuang for additional information.