Executive Summary

Section Contents

• Key economic characteristics of information
• Government policy on information in the UK
• The UK market for information collected by government
• Geospatial information provision: international comparisons of National Mapping Agencies
• Pricing by public bodies and economic regulation

This report presents the results of a consultancy study undertaken by Coopers & Lybrand on behalf of Ordnance Survey. The purpose of the study was to analyse the economic factors involved in the collection, dissemination, integration and pricing by government of its geospatial (footnote 1) data and information.

There are sections in the report covering:

• key characteristics of information, particularly geospatial information, and the underlying rationale for government involvement with this area of the economy;
• current UK government policy towards the provision of and charging for information;
• a review of the UK market for information collected by government;
• comparisons with the arrangements for provision of geospatial information in certain other countries; and
• a brief review of the key economic issues associated both with pricing by government-owned organisations and with the regulation of privatised monopolies.

Key economic characteristics of information

Information, and in particular geospatial information, has special economic characteristics which mean that governments are often involved with its collection and provision. Information is a form of "public good" and is often associated with "external" benefits. These "external" benefits include:

• support to the defence of the realm;
• support to the emergency services to assist with civil disaster and accident mitigation;
• input to better business and policy-making decisions; and
• ease of co-ordination between users, thus saving time and resource.

"External" benefits of geospatial information cannot easily be valued because they are highly disparate and often inextricably linked to the provision of other public goods. Because public goods and externalities are, in turn, often associated with "market failure" there will be a role for government in these markets.

Furthermore, provision of public goods often includes elements of a natural monopoly which governments usually seek to own or regulate. National interest arguments, which are not purely concerned with economics, often provide an additional stimulus for government involvement.

The economic advantages to government arising from comprehensive and consistent geospatial data collection and maintenance would not be delivered by the free market because of the economic characteristics of geospatial information as a "public good" and the "external" benefits which flow from its provision.

Government policy on information in the UK

Relevant statements of government policy include:

• HM Treasury Fees and Charges Guide;
• the Department of Trade and Industry's Tradeable Information Initiative
• the Open Government White paper
• on use of the Internet Other potentially relevant policy proposals considered in the report include those made by:
• the Campaign for the Freedom of Information
• the Labour Party
• the European Commission and Union

There appears to be a clear tension in current government policy between the pressure on providers to be more commercial and the restrictions placed on their participation in the provision of value added products and services.

There may also be an increasing conflict in some areas between the financial objectives set for government information providers and the pressure for greater openness in the provision of information.

These tensions, and the complex arguments involved with the provision of information by government, have been noted by both policy-makers and information providers.

The UK market for information collected by government

This section of the report includes:

• a segmentation of the markets for information collected by government;
• a summary of current practice in areas including pricing, funding and relationships with the private sector of key government information providers; and
• current market trends.

Government-produced information, especially geospatial information, is widely consumed by many different groups of users. Key existing users include the local authorities, the military and the utilities. The remainder of the market is highly fragmented and price-sensitive. This user profile is important when grouping key government information providers.

There are four primary reasons for Executive Agencies to collect information on behalf of government. These are:

• it is central to government's role in policy-making and resource allocation (e.g. Central Statistical Office);
• it is essential for reasons of "national interest" and to support the activities of other public bodies (e.g. Ordnance Survey, the Meteorological Office, the Hydrographic Office);
• it is required for regulatory purposes to support the smooth running of a market economy or to impose standards (e.g. HM Land Registry, Companies House and Registers of Scotland); and
• it helps to address "market failures" and provide data for commercial users.

Cost recovery levels are lowest for the CSO and highest for the information providers required for regulatory purposes. The key conclusions we note on the practices of government information providers are that:

• significant differences exist in the basis for establishing prices and funding levels, but some logic exists in each case once the reasons for data collection and the underlying cost structure are understood;
• there is some lack of transparency in the pricing of data and value added services;
• there are questions of consistency between policy and practice with regard to participation in value added service and product markets;
• it is genuinely difficult to measure the extent of externalities though these certainly exist

Key issues identified by both government information providers and users in our interviews include:

• the conflict between arguments for more open access to information and the benefits that the market place can provide;
• how to control access to data in future given current technological developments; and
• the increasing importance of integrating geospatial datasets, a development which should, as far as possible, be market- and application-led.

The market for geospatial data is generally regarded as immature and there is considered to be significant scope for future growth. Technological trends are changing the underlying business economics of information provision which will have major implications for future provision of data.

Geospatial information provision: international comparisons of national mapping agencies

In the time available, it was possible only to review the current position of national mapping agencies in a number of countries. The results are indicative rather than definitive. We compare GB with the USA, Australia, France, New Zealand and Germany, using the following key factors:

• institutional arrangements for provision of geospatial information;
• policy on freedom of information;
• cost recovery and pricing;
• copyright; and
• participation in the provision of value added services.

The key conclusions we draw from this section on international comparisons are:

• institutional arrangements to support the provision of geospatial information vary widely not least because of differing historical imperatives and different traditions in government structures;
• there is, nevertheless, significant government involvement, either at federal or state level, in the provision of geospatial data in all the countries covered;
• of the countries considered, Great Britain undoubtedly has the most consistent and detailed national topographic 'framework' dataset;
• Freedom of Information legislation and associated statutes and practices in the US federal government has been accompanied by a dissemination cost pricing constraint on US Geological Survey which has led to low cost recovery levels;
• in New Zealand, by contrast, Freedom of Information legislation has not been accompanied by similar price constraints and the mapping agency is moving towards full cost recovery although the land registry function has made a major contribution. The free supply of some related information may however have consequences and knock-on effects;
• Australia seems about to formalise a policy similar to the US model of pricing at "cost of supply" or dissemination cost for environmental data; and
• there is a wide variety of practice in terms of relationships with private sector value-added providers from, on the one hand, supplying basic data to, on the other, a few examples of direct competition in order to try and boost revenues to meet financial targets set by government.

Pricing by public bodies and economic regulation

This section covers the basic economic principles of welfare economics. It explains briefly the theory of the competitive market, dissemination cost pricing, classic monopoly, natural monopoly and price differentiating monopoly. Particular reference is made to how these might apply to an information provider. It is shown that there are many major practical considerations when translating the theory into actual pricing decisions.

All government geospatial information providers are 'regulated' in some way at present through Ministers who are accountable to Parliament. The rationale for more formal economic regulation procedure is considered. There would, we believe, be a widely perceived need for more formal economic regulation if provision of geospatial information in the UK were to be privatised. The costs and benefits of regulating geospatial information providers would need to be assessed carefully. The case for price control regulation by a specialist industry regulator is, in our view, relatively weak given:

the small size of the information providers in relation to, say, the utilities; the difficulties in defining suitable output metrics; the absence of strong monopoly power in some markets; and the sophistication of many of the key users of these products and services

It follows therefore that, if government were to proceed with privatisation of any geospatial information provider, other models of economic regulation would need to be considered.

Footnotes

1. this is defined as any data that has associated with it some geographical referencing, including referencing to the National Grid, postcodes, latitude/longitude or defined areas such as parliamentary constituencies.