GEOGRAPHIC INFORMATION: Value, Pricing, Production, and Consumption - Chapter 3

chapter three The business of GI: No such thing as a free lunch 3.1 The turbulent interplay of price, cost, and value Let us state something at the outset regarding the next two chapters. We are not against freely available data. We are not against a free lunch. We do not hold any particular doctrine about whether geographic information col-lected in the public sector should be freely available or available through a commercial cost or any cost level in between, i.e., cost of reproduction and dissemination, etc. We believe in freedom of information, but do not nec-essarily assume that the information always should, or needs to be, made available free of any charge. In all information collection and dissemina-tion transactions there are costs, and someone, somewhere, has to pay for them. Admittedly, the emergence of information technologies and electronic networks has reduced some of the costs dramatically, and as we see with e-commerce and the media, user consumption patterns have changed, as have users’ willingness to pay charges. This chapter, then, is a no-holds-barred exploration, but please do not take it personally. What we hope to achieve is to set the scene for a reasoned, objective debate within the widest range of geographic information (GI) stakeholders as possible, whether in govern-ment, business, or civil society, whether as owners, users, or custodians. The impact of the Internet on the pricing of information and communica-tion has been substantial. We can now access information that previously was the expensive and protected domain of specialists, for example, looking online at flight tracking at major airports (Floweb, 2006). Built on the emerging Google Maps and Google Earth (Google, 2006) innovations, Floweb contin-ues a process where the price of information and the quality and availabil-ity of information bring previously premium products and applications into the mass market. Computer flight simulators and in-car navigation are two examples of technologies that have experienced significant cost reduction. They previously were expensive, premium technologies. Automobiles have been demonstrating this trend for years, with air-conditioning and antilock brakes, which were previously available only on high-price executive cars, in the context of the innovation curve, but which are now normal fittings. Floweb also continues a process whereby the uncertain and unwelcome aspects of globalization, such as global terrorism, present ethical and political challenges to governments, particularly where readily available information 63 ` 2008 by Taylor & Francis Group, LLC 64 Geographic Information: Value, Pricing, Production, and Consumption may assist terrorism and crime. We reviewed those processes following the events of September 11, 2001 (Blakemore and Longhorn, 2001). In September 2005, the government of South Korea was upset because Google Earth showed the locations of sensitive military installations (Haines, 2005). In 2006, Google Earth was used to detect a Chinese military model of disputed territory on the border with India (Haines, 2006). The U.S. government has reserved the right to shut down the GPS satellites at a time of national emergency (Wired, 2004), a fear that in part had already motivated Europe to launch its own nav-igational satellite system, Galileo (Shachtman, 2004). The U.S. government also started to remove information from the public domain that was deemed to be supportive to the planning of terrorism (FGDC, 2004a). We have become used to reading newspapers online free of charge. An information paradox has developed whereby we often are still willing to pay real money to receive a newspaper delivered to our residence, whereas we can read the information online, often at no cost, well before the relatively outdated newspaper has arrived. Such is the disruptive pace of change that there are some fears that wikis, blogs, and citizen journalism may kill off the newspaper in its traditional form, for how will newspapers be able to obtain the revenue to invest in their production if online access is free? Far from killing off newspapers as a genre, however, the Economist argues that “for hard-news reporting — as opposed to comment — the results of net journalism have admittedly been limited” (Economist, 2006e). In effect, the Economist is arguing that quality, continuity, and robustness will continue to have a significant market demand. A similar finding was reported by Michael Blakemore and Sinclair Sutherland (2005), in the context of their experiences running the U.K. online labor market statistics service NOMIS. When, in 2000, U.K. National Statis-tics made the service free of charge, the expectation was that the removal of charging would lead to an explosion of usage. However, while the number of users did increase, the actual usage did not increase proportionately. Much usage was one-off, and the users who previously had paid the most for high levels of usage now had diminished power in influencing service develop-ment; whereas their feedback had been significant before 2000 in maintain-ing quality control and prioritizing service developments. While many free-GI proponents defend their stance on the premise that more information, made available free of charge, will lead to more usage and societal impact, we do not infer that there is an automatic, direct, and immu-table link between free-of-cost (to the end user) access to GI and increased usage or societal impact. Consider U.K. public museums, for example. Under the Thatcher government, with its mantra resembling “If you need it, pay for it; if you cannot pay for it, you do not really need it,” charges were intro-duced for entry to museums where there had previously been no charge. Not surprisingly, entry levels dramatically reduced, and in 2001 the New Labour Government of Tony Blair abolished the charges. A report 5 years after access was again made free indicated that there was an 83% increase ` 2008 by Taylor & Francis Group, LLC Chapter three: The Business of GI 65 in visits, some 30 million extra visits over 5 years (Brown, 2006). So far, so good. Lower prices often lead to more consumption. However, while U.K. Culture Secretary Tessa Jowell argued that these were “inspirational figures … there is a real appetite for serious culture in this country,” (Brown, 2006) there was no clear evidence whether the figures represented more visits by the same people, i.e., those who had been willing to pay in the past, and therefore cost of free entry was subsidized for this more affluent segment of society, or whether the visits by people who had been previously excluded had resulted in a cultural impact. In effect, did the measurable transactions of people through the museum door translate into societal value? Further-more, the museum income streams were now largely dependent on a cen-tral government grant, plus income from areas such as merchandising and special exhibitions — not everything was free and some premium facilities were made available only at a cost. As a result, there was now concern that the costs of meeting the increased demand were not being met, and that the government was considering cutting the central grant in 2007, leading to the possibility that charges would be reintroduced. As should be recognized by everyone, government taxation coffers are not limitless, and demands upon the government purse are many and varied. These demands are often ful-filled using cost–benefit considerations characterized by multiple interpre-tations, from the purely financial, e.g., 10 million euro spent on transport today will generate 100 million euro economic benefit overall, to the more subjective and emotive, e.g., 10 million euro spent today on pay for more doctors, nurses, or health care will prevent a statistically calculable number of citizens’ deaths. It is the turbulent interaction of supply, demand, and resource, combined with the almost religious zeal of policy positions (charge a fee or make it free) that we investigate in this chapter. We introduced theories of economic value of information earlier in this book, and here we relate the theory to the operational practice of politics, business, and money. For example, in 2006 the U.K. Office of Fair Trading (OFT) investigated the relative success of com-modified data availability in the U.K. by public sector information holders (PSIHs) and found that more competition in data provision, not necessarily for free but at justifiable costs, such as cost of dissemination, “could ben-efit the UK economy by around £1 billion a year” (OFT, 2006). The restrict-ing factors were more in areas of anticompetitive behavior by information owners who needed to maximize prices and protect market position so that they could meet government income targets, the principle under which U.K. government trading funds operate. The OFT report implies that it is when charging is applied in this context that data access diminishes, with det-rimental effect on the economy. However, the interpretation by those who promote free access to data, such as the Free Our Data campaign in the UK, is very clear: “public bodies are secretive about the data they hold, restrictive in the way they license it, and may be abusing their position as monopolies” (Cross, 2006). ` 2008 by Taylor & Francis Group, LLC 66 Geographic Information: Value, Pricing, Production, and Consumption Price and value interplay in complex ways in the information society. Something that is free may have high value, and not necessarily vice versa, and something that has low value can generate much higher value. In 2006, one person sold a single paper clip and purchased a house in the town of Kipling, Saskatchewan, Canada (BBC, 2006f). Admittedly this was not a direct purchase, but a series of trades that in truth did not have direct value relationships. The first online trade was the paper clip for a novelty pen, and the 14th and final trade was a role in a Hollywood movie for the house. The cost–price–value interplay involved many processes. The fact that the initia-tive gained significant media attention encouraged people to make trades, to reap the value of 5 minutes of fame. As the trades progressed, the value exchange became more significant, driven perhaps by the trading of intan-gibles, an experience rather than an object that may not have been directly purchased by the owners, for example, an afternoon in the company of the rock star Alice Cooper or the value of temporary fame in the film role. After decades of having to pay for telephone communications, either by time or subscription, will Voice over Internet Protocol (VoIP), as championed by the Skype service, “herald the slow death of traditional telephony” (Econ-omist, 2005a)? Skype, however, was never truly free, but was just not exact-ing a direct charge to most users. Those who use Skype are in effect donating some of their resources to the service, which as a result has almost no mar-ginal costs when expanding the service, because “users ‘bring’ their own computers and internet connections or marketing (users invite each other)” (Economist, 2005b). Skype uses your computer resources as part of its virtual infrastructure, avoiding the significant infrastructure investment costs. That is laudable, and conceptually Skype is a business version of the much lauded SETI (Search for Extra-Terrestrial Intelligence) project. This is an example of gifting technology, where people donate spare resources on their PCs to allow the SETI project to process huge amounts of data in search of extraterrestrial intelligence (McGee and Skågeby, 2004). Another gifting technology proj-ect is Climateprediction*, which also uses the computing capacity gifted by individuals (BBC, 2002). Problems have occurred, however, when many people use Skype at work, and the resource impact can be significant — each user in effect is donating a proportion of the corporate network to Skype (Crampton, 2006). Business strategy also has an impact in pricing, for Skype was purchased in October 2005 by eBay, and the purchase price of $2.5 billion needed to be recouped somehow: an income stream is a classic mechanism. Therefore, from the start of 2007, calls made to landlines in the U.S. and Canada are no longer free, but are charged at a flat fee of $30 a year, being “part of a broader strategy by eBay to expand Skype’s product offerings and revenue” (Richtel, 2006). The flat fee, and the level of it, is an elegant mediation between consumer resis-tance to the introduction of fees. It is not so high as to deter the majority of * http://www.climateprediction.net/. ` 2008 by Taylor & Francis Group, LLC Chapter three: The Business of GI 67 users, and efficiency for the business, and it is a single transaction to process, and the volume of payment transactions should generate significant levels of income for the business to invest into infrastructure. Skype thus provides a good example of the key theme of this chapter: the lunch is seldom free — it is just paid for in different ways. The death of a genre, when examined historically, is more a case of a disruptive technology threatening the existing status quo. This leads to a nervous and often defensive reaction by those with vested interests, thus resulting in a mutation of the technology to provide greater market access — newspapers, television, and telephones all have followed such a path. The equivalent process seen in geographical information is the expectation that data will be available at increasingly low cost, or even free of charge. There-fore, this chapter aims to build a conceptual framework to explain the emo-tive, often polarized debate about whether public sector information (PSI) — of which government GI (PSGI) is a component, and we shall use these two acronyms and the terms data and information interchangeably — should be freely available to citizens and businesses. The debate is often complicated by lack of prior definition of the term free used by those deliberating differ-ent issues, such as freely available, free of charge, free of restrictions on use, free of restrictions on reuse (exploitation), and readily available — the last term imply-ing that the data may be free of charge, but not available quickly enough or in appropriate formats for use or reuse. 3.2 Access, demand, resource, and information supply At the outset we hypothesize that providing access to information is an eco-nomic and political contest between resource allocation and user demand, as already indicated in the few cases presented in the previous section. The overall perspective will be one of realism. While many cost–benefit argu-ments have been proposed for making information freely available (see Chapter 6), thus generating significant use of GI, there is a real difficulty in then ensuring that information is both up to date and targeted to the broad set of user needs, let alone those needs that are of most value to society as a whole. The contest is nowhere more evident than in core government ser-vices such as public health. National health services have perversely been focused on both public health, through processes such as immunization, and illness, i.e., treating people when they are unwell. These are often ser-vices that are primarily centrally funded through taxation and which pro-mote themselves as being largely free at the point of demand. The result is, inevitably, a mismatch between supply and demand, both structurally and spatially. Attempts to diminish the mismatch include: • Administrative reform, e.g., creating centralized health trusts in the U.K. system to supposedly reduce administrative cost ` 2008 by Taylor & Francis Group, LLC ... - tailieumienphi.vn