Economic value of data openness

(this page is part of my Open Data, Open Society report. Please follow that link to reach the introduction and Table of Content, but don’t forget to check the notes to readers!)

Economic value of open data falls in two very distinct categories that will be examined separately: the first is wealth generated outside public bodies, that is more opportunities for private businesses, job creation and so on. The other is savings inside the administrations themselves, because opening data makes it possible to cut some activities or handle them in more efficient manners. In this report, looking at the issue from the point of view of lawmakers and public officers evaluating when and how open the data they manage, we call the first type of value “External” and the second one “Internal”.

External value of data openness

The first positive effects of opening PSI, specifically mentioned by the MEPSIR study, are “more companies in the value chain, at various points and with more diversified products, all things that lead to increased tax revenues”. Opening data as it will be shown in the next chapter makes new businesses easier to start and cheaper to operate: in such an environment they don’t have to pay high fees just to access the data they need to work, or pay more than it’s absolutely necessary for customization, normalization and conversion of the same data.

Costs from limited access to PSI data for the private sector also include: for businesses, excessive time spent negotiating, managing and complying with licenses and indirect costs such as loss of opportunity and unfair competition; for citizens, lost job opportunities or higher taxes.

A few numbers that allow, even if in a non-systematic way, to have an idea of how much the value of open PSI may be comes from weather data in USA, which are managed by NOAA and openly available: “The underlying idea is that the information that NOAA generates has strong public good characteristics. First, it is difficult to exclude users. A 1977 study done to estimate the economic benefits of a major NOAA initiative to develop coastal and ocean observing systems estimated them at more than $700 million annually, based on calculations of the value of information for a group of coastal and ocean-related industries—oil and gas, fishing, recreation, tourism, and two or three other large sectors."

USA daily weather forecasts built on top of NOAA data and freely available on TVs, radio, newspapers, and online also have huge so-called non-market use benefits. Such benefits cannot be measured by multiplying prices times the quantities sold because the goods are not exchanged in a market. Instead, according to NOAA, by using state-of-the-art survey techniques and econometrics, it was estimated that there is a willingness to pay of about $103.64 per household for the approximately 110 million households in the United States, which leads to an estimated total of $11.4 billion in annual value (including $3 billion in a typical hurricane season alone).

Looking at weather data in Europe, in “Public Information wants to be free” (2005) James Boyle estimates that Europe invests EUR9.5bn in weather data and gets approximately EUR68bn back in economic value - in everything from more efficient farming and construction decisions, to better holiday planning - a 7-fold multiplier. The United States, by contrast invests twice as much - EUR19bn - but gets back a return of EUR750bn, a 39-fold multiplier.

In her already quoted report, Graves says that eliminating “GBP20 millions from high pricing, GBP140 millions from restriction of downstream competition, and GBP360 millions from failure to exploit PSI… could lead to a doubling in the value of British PSI to around a billion pounds per year”.

Economic benefits from data openness can happen outside governments at two other levels. Open PSI helps non-government organizations (NGOs), which constitute a significant part of GNP in EU, to understand where to work and how, both at country and city level. An already working example of the first case is the Open Budget Index, which in 2008 found that 80% of the world’s governments fail to provide adequate information for the public to hold them accountable for managing their money because: “Nearly 50 percent of 85 countries provide such minimal information that they are able to hide unpopular, wasteful, and corrupt spending”. Information of this kind, even locally, can help charities to find who needs their services most and where or to boost their campaigns. Data openness also enables (foreign) investors to evaluate where to invest and how much to trust local administrations.

Finally, it is worth noting that Open Data can create business opportunities even when not all potential customers or beneficiaries have Internet Access: Question Box, a mobile phone-based tool developed with support from the Grameen Foundation, allows Ugandans to call or message operators who have access to a database full of information on health, agriculture and education - a little like Google for people without Internet access. Such an approach could be viable even in Europe, even if the socioeconomic context and the average level of technical infrastructures are very different. In Europe, information and support services like the Question Box, which are possible only when there is unrestricted access to certain data, could be offered by NGOs and private businesses to any group of people who, due to any combination of low income, language difficulties, no familiarity with computers or lack of broadband connectivity, would not be able to use the same services by themselves: senior citizens and immigrants are just the two largest groups of potential users for this kind of services businesses that would made be possible by opening PSI.