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The Economics of PSI:
a Policy-Oriented Analysis


                                                                 Raimondo Iemma
                                        Nexa Center for Internet & Society | EVPSI
                                                               http://nexa.polito.it




      LAPSI 4th Conference, Turin 9th of July 2012
Items discussed
●
    Economic nature of PSI
●
    Upstream features
●
    Downstream features
●
    Costs vs benefits




                    LAPSI 4th Conference, Turin 9th of July 2012
Items discussed
●
    Economic nature of PSI
●
    Upstream features
●
    Downstream features
●
    Costs vs benefits




                    LAPSI 4th Conference, Turin 9th of July 2012
Three assumptions




            LAPSI 4th Conference, Turin 9th of July 2012
Three assumptions


1) PSI holds recurrent features of digital
  information goods + further characteristics;




                  LAPSI 4th Conference, Turin 9th of July 2012
Three assumptions


1) PSI holds recurrent features of digital
  information goods + further characteristics
2) Need to separate the inherent features of a
  good from the attributes of its supply
  (licensing, pricing, etc.);



                  LAPSI 4th Conference, Turin 9th of July 2012
Three assumptions


1) PSI holds recurrent features of digital
  information goods + further characteristics;
2) Need to separate the inherent features of a
  good from the attributes of its supply
  (licensing, pricing, etc.);
3) The decision agent is the Government (or the
  PSI holder itself).
                  LAPSI 4th Conference, Turin 9th of July 2012
PSI in the digital environment
•
    Non-rival in consumption (access + reuse)
•
    Hardly excludable (and with ex-ante and ex-
    post costs)
•
    In some cases, it may be an experience good




                   LAPSI 4th Conference, Turin 9th of July 2012
PSI in the digital environment
•
    Non-rival in consumption (access + reuse)
•
    Hardly excludable (and with ex-ante and ex-
    post costs)
•
    In some cases, it may be an experience good
    --> PSI as (potentially) an impure public good




                    LAPSI 4th Conference, Turin 9th of July 2012
PSI in the digital environment
•
    Non-rival in consumption (access + reuse)
•
    Hardly excludable (and with ex-ante and ex-
    post costs)
•
    In some cases, it may be an experience good
    --> PSI as (potentially) an impure public good
    --> What matters is whether and how PSI is
    available for reuse


                    LAPSI 4th Conference, Turin 9th of July 2012
Currently, PSI is made available as...
•
    A public good
    --> Open Data platforms




                    LAPSI 4th Conference, Turin 9th of July 2012
Currently, PSI is made available as...
•
    A public good
    --> Open Data platforms
•
    A club good
    --> Firm registries
    (only a few players corresponding a fee can
    actually reuse PSI de jure)



                    LAPSI 4th Conference, Turin 9th of July 2012
Currently, PSI is made available as...
•
    A public good
    --> Open Data platforms
•
    A club good
    --> Firm registries
    (only a few players corresponding a fee can
    actually reuse PSI de jure)
•
    'Something in between' (see e.g. the case of DK
    addresses explained afterwards)
                    LAPSI 4th Conference, Turin 9th of July 2012
Items discussed
●
    Economic nature of PSI
●
    Upstream features
●
    Downstream features
●
    Costs vs benefits




                    LAPSI 4th Conference, Turin 9th of July 2012
Peculiar cost structure
•
    Not only marginal costs of reproduction tend to
    zero...
•
    but, more importantly, fixed costs (collection,
    management, etc.) have already been covered.




                    LAPSI 4th Conference, Turin 9th of July 2012
Peculiar cost structure
•
    Not only marginal costs of reproduction tend to
    zero...
•
    but, more importantly, fixed costs (collection,
    management, etc.) have already been covered.
    --> we do not have to find an efficient way to fund
    the creation of PSI (as ancillary / incidental good);
    --> PSI is (almost) available for reuse.


                      LAPSI 4th Conference, Turin 9th of July 2012
Usual (first) steps by a PSIH to
make PSI available for reuse
  Activity                                          Main cost item

  1) Setting the stage                              Internal coordination
                                                    Internal education
                                                    Definition of guidelines


  2) Opening a few datasets                         Small technical costs (usually datasets
                                                    that do not require any manipulation)

  3) Opening more 'critical' datasets               Anonymization (where needed)
                                                    Meaningful metadatation (where
                                                    needed)




                               LAPSI 4th Conference, Turin 9th of July 2012
Back to the cost structure
•
    Fixed costs are to be taken for granted.
•
    To make PSI actually available for reuse:
    •
        empirically, internal coordination costs represent
        the most relevant item (this is the 'fixed part' of the
        supply costs);
    •
        strong economies of scale emerge;
    •
        efficiency curve effects.



                         LAPSI 4th Conference, Turin 9th of July 2012
Items discussed
●
    Economic nature of PSI
●
    Upstream features
●
    Downstream features
●
    Costs vs benefits




                    LAPSI 4th Conference, Turin 9th of July 2012
Demand-side
•
    Strong network effects
    ●
        the value of a dataset increases the more it is linked or
        combined with other datasets (think of Linked Open
        Data)
•
    PSI as 'basic input'
    ●
        centralized knowledge to be combined with local
        knowledge
    ●
        e.g. 'Apps4Italy': around 50 of the ideas could not be
        implemented without PSI

                         LAPSI 4th Conference, Turin 9th of July 2012
PSI as Infrastructure? (cfr. Frischmann)
 Basic features:
 1) significant role of Government (provider, subsidizer,
 coordinator or regulator);
 2) traditionally managed as commons (not prioritized);
 3) positive externalities.




                      LAPSI 4th Conference, Turin 9th of July 2012
PSI as Infrastructure? (cfr. Frischmann)
 AND:
 - non rival consumption of its resources;
 - producing input to downstream activity;
 - wide range of (private, public, social) goods downstream.




                     LAPSI 4th Conference, Turin 9th of July 2012
Items discussed
●
    Economic nature of PSI
●
    Upstream features
●
    Downstream features
●
    Costs vs benefits




                   LAPSI 4th Conference, Turin 9th of July 2012
Basic situation
    A change in the PSI-supply policy of a specific PSIH
    holder:
•
    from a closed and / or paying reuse;
•
    to an open / free reuse.




                        LAPSI 4th Conference, Turin 9th of July 2012
A possible (welfare) approach
(cfr. Houghton)
•
    PSIH net position
    •
        Annual foregone revenues (-)
    •
        Annual savings (+) / e.g. transaction costs




                            LAPSI 4th Conference, Turin 9th of July 2012
A possible (welfare) approach
(cfr. Houghton)
•
    PSIH net position
    •
        Annual foregone revenues (-)
    •
        Annual savings (+) / e.g. transaction costs
•
    (Re)users savings
    •
        No more payment (+)
    •
        Time saved (finding material) (+)
    •
        Time saved (license enquiries) (+)




                            LAPSI 4th Conference, Turin 9th of July 2012
A possible (welfare) approach
(cfr. Houghton)
•
    PSIH net position
    •
        Annual foregone revenues (-)
    •
        Annual savings (+) / e.g. transaction costs
•
    (Re)users savings
    •
        No more payment (+)
    •
        Time saved (finding material) (+)
    •
        Time saved (license enquiries) (+)
•
    Welfare impact / externalities
    •
        Based on ex-ante vs. ex-post reuse indicators

                            LAPSI 4th Conference, Turin 9th of July 2012
A possible (welfare) approach
(cfr. Houghton)
•
    PSIH net position
                                                                           In some cases, a positive
    •
        Annual foregone revenues (-)                                       balance can be identified
                                                                           even at this stage
    •
        Annual savings (+) / e.g. transaction costs
•
    (Re)users savings
    •
        No more payment (+)
    •
        Time saved (finding material) (+)
    •
        Time saved (license enquiries) (+)
•
    Welfare impact / externalities
    •
        Based on ex-ante vs. ex-post reuse indicators

                            LAPSI 4th Conference, Turin 9th of July 2012
After all...
  ... benefits are distributed, while costs (and revenues for
  PSIH) are localized.
  Therefore, when drafting policies we should (also) ask
  ourselves:
  How do the benefits from PSI have to be allocated / internalized?
  At what stage of the PSI supply should competition (if any) be
  actually achieved? Ideally --> at the earliest possible stage.




                        LAPSI 4th Conference, Turin 9th of July 2012
Some examples                                                                 OPENNESS
                                                                               DEGREE

•
    'Typical' firm registry: (virtual) competition downstream
    'distributors'




                               LAPSI 4th Conference, Turin 9th of July 2012
Some examples                                                                 OPENNESS
                                                                               DEGREE

•
    'Typical' firm registry: (virtual) competition downstream
    'distributors'
•
    Public transport companies using PSI as 'bargaining chip' with selected
    complementary players (e.g. maps producers), releasing as open
    only a small subset of their data. No competition




                               LAPSI 4th Conference, Turin 9th of July 2012
Some examples                                                                 OPENNESS
                                                                               DEGREE

•
    'Typical' firm registry: (virtual) competition downstream
    'distributors'
•
    Public transport companies using PSI as 'bargaining chip' with selected
    complementary players (e.g. maps producers), releasing as open
    only a small subset of their data. No competition
•
    DK address data: once not available as centralized DB, now available to
    distributors mainly for 'supply chain' reasons but at very small costs
    (so that double marginalization on users has lower effects); actual
    competition downstream those distributors




                               LAPSI 4th Conference, Turin 9th of July 2012
Some examples                                                                 OPENNESS
                                                                               DEGREE

•
    'Typical' firm registry: (virtual) competition downstream
    'distributors'
•
    Public transport companies using PSI as 'bargaining chip' with selected
    complementary players (e.g. maps producers), releasing as open
    only a small subset of their data. No competition
•
    DK address data: once not available as centralized DB, now available to
    distributors mainly for 'supply chain' reasons but at very small costs
    (so that double marginalization on users has lower effects); actual
    competition downstream those distributors
•
    Spanish Cadastre: free and open data downloadable in bulk! Actual
    competition downstream PSIH




                               LAPSI 4th Conference, Turin 9th of July 2012
Thank you


                                                           Raimondo Iemma
                                  Nexa Center for Internet & Society | EVPSI
                                                  raimondo.iemma@polito.it




LAPSI 4th Conference, Turin 9th of July 2012

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Economic aspects of Public Sector Information

  • 1. The Economics of PSI: a Policy-Oriented Analysis Raimondo Iemma Nexa Center for Internet & Society | EVPSI http://nexa.polito.it LAPSI 4th Conference, Turin 9th of July 2012
  • 2. Items discussed ● Economic nature of PSI ● Upstream features ● Downstream features ● Costs vs benefits LAPSI 4th Conference, Turin 9th of July 2012
  • 3. Items discussed ● Economic nature of PSI ● Upstream features ● Downstream features ● Costs vs benefits LAPSI 4th Conference, Turin 9th of July 2012
  • 4. Three assumptions LAPSI 4th Conference, Turin 9th of July 2012
  • 5. Three assumptions 1) PSI holds recurrent features of digital information goods + further characteristics; LAPSI 4th Conference, Turin 9th of July 2012
  • 6. Three assumptions 1) PSI holds recurrent features of digital information goods + further characteristics 2) Need to separate the inherent features of a good from the attributes of its supply (licensing, pricing, etc.); LAPSI 4th Conference, Turin 9th of July 2012
  • 7. Three assumptions 1) PSI holds recurrent features of digital information goods + further characteristics; 2) Need to separate the inherent features of a good from the attributes of its supply (licensing, pricing, etc.); 3) The decision agent is the Government (or the PSI holder itself). LAPSI 4th Conference, Turin 9th of July 2012
  • 8. PSI in the digital environment • Non-rival in consumption (access + reuse) • Hardly excludable (and with ex-ante and ex- post costs) • In some cases, it may be an experience good LAPSI 4th Conference, Turin 9th of July 2012
  • 9. PSI in the digital environment • Non-rival in consumption (access + reuse) • Hardly excludable (and with ex-ante and ex- post costs) • In some cases, it may be an experience good --> PSI as (potentially) an impure public good LAPSI 4th Conference, Turin 9th of July 2012
  • 10. PSI in the digital environment • Non-rival in consumption (access + reuse) • Hardly excludable (and with ex-ante and ex- post costs) • In some cases, it may be an experience good --> PSI as (potentially) an impure public good --> What matters is whether and how PSI is available for reuse LAPSI 4th Conference, Turin 9th of July 2012
  • 11. Currently, PSI is made available as... • A public good --> Open Data platforms LAPSI 4th Conference, Turin 9th of July 2012
  • 12. Currently, PSI is made available as... • A public good --> Open Data platforms • A club good --> Firm registries (only a few players corresponding a fee can actually reuse PSI de jure) LAPSI 4th Conference, Turin 9th of July 2012
  • 13. Currently, PSI is made available as... • A public good --> Open Data platforms • A club good --> Firm registries (only a few players corresponding a fee can actually reuse PSI de jure) • 'Something in between' (see e.g. the case of DK addresses explained afterwards) LAPSI 4th Conference, Turin 9th of July 2012
  • 14. Items discussed ● Economic nature of PSI ● Upstream features ● Downstream features ● Costs vs benefits LAPSI 4th Conference, Turin 9th of July 2012
  • 15. Peculiar cost structure • Not only marginal costs of reproduction tend to zero... • but, more importantly, fixed costs (collection, management, etc.) have already been covered. LAPSI 4th Conference, Turin 9th of July 2012
  • 16. Peculiar cost structure • Not only marginal costs of reproduction tend to zero... • but, more importantly, fixed costs (collection, management, etc.) have already been covered. --> we do not have to find an efficient way to fund the creation of PSI (as ancillary / incidental good); --> PSI is (almost) available for reuse. LAPSI 4th Conference, Turin 9th of July 2012
  • 17. Usual (first) steps by a PSIH to make PSI available for reuse Activity Main cost item 1) Setting the stage Internal coordination Internal education Definition of guidelines 2) Opening a few datasets Small technical costs (usually datasets that do not require any manipulation) 3) Opening more 'critical' datasets Anonymization (where needed) Meaningful metadatation (where needed) LAPSI 4th Conference, Turin 9th of July 2012
  • 18. Back to the cost structure • Fixed costs are to be taken for granted. • To make PSI actually available for reuse: • empirically, internal coordination costs represent the most relevant item (this is the 'fixed part' of the supply costs); • strong economies of scale emerge; • efficiency curve effects. LAPSI 4th Conference, Turin 9th of July 2012
  • 19. Items discussed ● Economic nature of PSI ● Upstream features ● Downstream features ● Costs vs benefits LAPSI 4th Conference, Turin 9th of July 2012
  • 20. Demand-side • Strong network effects ● the value of a dataset increases the more it is linked or combined with other datasets (think of Linked Open Data) • PSI as 'basic input' ● centralized knowledge to be combined with local knowledge ● e.g. 'Apps4Italy': around 50 of the ideas could not be implemented without PSI LAPSI 4th Conference, Turin 9th of July 2012
  • 21. PSI as Infrastructure? (cfr. Frischmann) Basic features: 1) significant role of Government (provider, subsidizer, coordinator or regulator); 2) traditionally managed as commons (not prioritized); 3) positive externalities. LAPSI 4th Conference, Turin 9th of July 2012
  • 22. PSI as Infrastructure? (cfr. Frischmann) AND: - non rival consumption of its resources; - producing input to downstream activity; - wide range of (private, public, social) goods downstream. LAPSI 4th Conference, Turin 9th of July 2012
  • 23. Items discussed ● Economic nature of PSI ● Upstream features ● Downstream features ● Costs vs benefits LAPSI 4th Conference, Turin 9th of July 2012
  • 24. Basic situation A change in the PSI-supply policy of a specific PSIH holder: • from a closed and / or paying reuse; • to an open / free reuse. LAPSI 4th Conference, Turin 9th of July 2012
  • 25. A possible (welfare) approach (cfr. Houghton) • PSIH net position • Annual foregone revenues (-) • Annual savings (+) / e.g. transaction costs LAPSI 4th Conference, Turin 9th of July 2012
  • 26. A possible (welfare) approach (cfr. Houghton) • PSIH net position • Annual foregone revenues (-) • Annual savings (+) / e.g. transaction costs • (Re)users savings • No more payment (+) • Time saved (finding material) (+) • Time saved (license enquiries) (+) LAPSI 4th Conference, Turin 9th of July 2012
  • 27. A possible (welfare) approach (cfr. Houghton) • PSIH net position • Annual foregone revenues (-) • Annual savings (+) / e.g. transaction costs • (Re)users savings • No more payment (+) • Time saved (finding material) (+) • Time saved (license enquiries) (+) • Welfare impact / externalities • Based on ex-ante vs. ex-post reuse indicators LAPSI 4th Conference, Turin 9th of July 2012
  • 28. A possible (welfare) approach (cfr. Houghton) • PSIH net position In some cases, a positive • Annual foregone revenues (-) balance can be identified even at this stage • Annual savings (+) / e.g. transaction costs • (Re)users savings • No more payment (+) • Time saved (finding material) (+) • Time saved (license enquiries) (+) • Welfare impact / externalities • Based on ex-ante vs. ex-post reuse indicators LAPSI 4th Conference, Turin 9th of July 2012
  • 29. After all... ... benefits are distributed, while costs (and revenues for PSIH) are localized. Therefore, when drafting policies we should (also) ask ourselves: How do the benefits from PSI have to be allocated / internalized? At what stage of the PSI supply should competition (if any) be actually achieved? Ideally --> at the earliest possible stage. LAPSI 4th Conference, Turin 9th of July 2012
  • 30. Some examples OPENNESS DEGREE • 'Typical' firm registry: (virtual) competition downstream 'distributors' LAPSI 4th Conference, Turin 9th of July 2012
  • 31. Some examples OPENNESS DEGREE • 'Typical' firm registry: (virtual) competition downstream 'distributors' • Public transport companies using PSI as 'bargaining chip' with selected complementary players (e.g. maps producers), releasing as open only a small subset of their data. No competition LAPSI 4th Conference, Turin 9th of July 2012
  • 32. Some examples OPENNESS DEGREE • 'Typical' firm registry: (virtual) competition downstream 'distributors' • Public transport companies using PSI as 'bargaining chip' with selected complementary players (e.g. maps producers), releasing as open only a small subset of their data. No competition • DK address data: once not available as centralized DB, now available to distributors mainly for 'supply chain' reasons but at very small costs (so that double marginalization on users has lower effects); actual competition downstream those distributors LAPSI 4th Conference, Turin 9th of July 2012
  • 33. Some examples OPENNESS DEGREE • 'Typical' firm registry: (virtual) competition downstream 'distributors' • Public transport companies using PSI as 'bargaining chip' with selected complementary players (e.g. maps producers), releasing as open only a small subset of their data. No competition • DK address data: once not available as centralized DB, now available to distributors mainly for 'supply chain' reasons but at very small costs (so that double marginalization on users has lower effects); actual competition downstream those distributors • Spanish Cadastre: free and open data downloadable in bulk! Actual competition downstream PSIH LAPSI 4th Conference, Turin 9th of July 2012
  • 34. Thank you Raimondo Iemma Nexa Center for Internet & Society | EVPSI raimondo.iemma@polito.it LAPSI 4th Conference, Turin 9th of July 2012