The economic impact of open data

This page is collecting case studies and references to the economic impact of open data.

Formal research

Peer reviewed formal research

1. Newbery, Bently and Pollock (2008) Models of Public Sector Information Provision via Trading Funds. Cambridge University, commissioned jointly by the Department for Business, Enterprise and Regulatory Reform (BERR) and HM Treasury in July 2007. http://www.berr.gov.uk/files/file45136.pdf

   This paper provides evidence for the most efficient pricing for an organisation's to be marginal cost, at a potential impact to the economy of £6 billion of economic activity.

2. Fornefeld, Boele-Keimer, Recher and Fanning (2009). Assessment of the Re-use of Public Sector Information (PSI) in the Geographical Information, Meteorological Information and Legal Information Sectors. MICUS Management Consulting, for the European Commission.

   (p 30) Austria: case study

   What was the effect of changing the data policy from charging at a profit to charing at marginal costs?

   Number of datasets downloaded and used in commercial applications went up by 7,000%.

   Spain went for no charge:

   The number of visits to their data site went up year on year since they started; in 2007 they had 15 million requests.

   (p 31) Catalonia: "An analysis of the impact of a free access to spatial data in Catalonia: demonstrated that such initiative is highly profitable to public institutions, by saving a lot of time, simplifying processes and making optimal use of the available information. The impact on private companies is also positive."

   Germany

   (p. 40) List of countries and how they changed their legislation to release public data for free. (Iceland, Netherlands, Norway, Slovenia and Spain)

   (p. 41) Figure 48 How has the data policy changed in the meteorological sector?

   (p 74) "Conclusion from this research is undoubtedly positive: growth rates have been reported in every market segment under consideration. The full improved access to information from the public sector in Europe contributes to this success."

3. Lippert (2010) Public Sector Information Reuse in Denmark: European Public Sector Information Platform, Topic Report No. 20. European Public Sector Information (PSI) Platform, funded by the European Commission.

   (p. 7) "To quantify the economic importance of PSI as a resource NITA has had an analysis made by Gartner Group presenting an estimate of the business potential in the reuse of public data. The estimate is that business reuse of the public data in Denmark could be worth at least DKK 600 million (more than EUR 80 million) a year. This corresponds well with the EU Commission’s estimate of an EU-wide annual potential of 27 billion EUR."

4. Commercial exploitation of Europe’s public sector information (2000) Final Report, PIRA International for the European Commission Directorate General for the Information Society.

   (p 9, full report) "The private sector has long argued that existing revenue based licensing models for PSI have operated against their interests and those of consumers by impeding the development of new products. Our study is the first to suggest that such models may even be operating against the financial interests of governments. Although governments gain income from the commercial license fees, they lose the taxation and employment benefits from the higher volumes of commercial activity that would be generated by abandoning charges. We find that a conservative projection of a doubling of market size resulting from eliminating license fees would produce additional taxation revenues to more than offset the lost income from PSI charges."

   (Interestingly enough, these estimates -- from 2000 -- are based on an expectation of market size doubling. The other papers we are reading indicate that the growth is orders of magnitude, not just double.)

5. Corbin (2009) EU PSI Pricing Survey. European Public Sector Information (PSI) Platform, funded by the European Commission.

   This shows that the UK's prices for data are already higher than any other EU country except the Czech Republic.

   (p. 12 - ePSIplus PSI Pricing Survey. Q5: Re-use countries. On http://www.epsiplus.net/psi_library/reports/epsiplus_psi_pricing_survey_findings/psi_pricing_survey_report)

6. The value of Danish address data: Social benefits from the 2002 agreement on procuring address data etc. free of charge (2010) Danish Enterprise and Construction Authority

   In 2002, the official Dutch address data was made available free of charge.

   (p. 1) "The conclusion of the study is that the direct financial benefits from the agreement for society in the period 2005-2009 amount to around EUR 62 million (~DKK 471 million). Until 2009 the total costs of the agreement has been around EUR 2 million."

   (p. 2) "In 2010 it is estimated that social benefits from the agreement will be about EUR 14 million, while costs will total about EUR 0.2 million. Around 30% of the benefits will be in the public sector and around 70% will be in the private sector."

7. Garcia Almirall, Montse Moix Bergadà, Pau Queraltó Ros (2008) The Socio-Economic Impact of the Spatial Data Infrastructure of Catalonia. M. Craglia, Editor. European Commission: Joint Research Centre, Institute for Environment and Sustainability.

   (p. 5) "The objective of IDEC is to promote the use of geographic information (GI) by making data more easily available to public and private sector users, and to the general public."

   Overall investment of €1.5 million over a five year period; the total internal savings to local authorities exceed €2.6 million per year.

8. Measuring European Public Sector Resources (2006) Executive summary. European Public Sector Information (PSI) Platform, funded by the European Commission.

   (p. 16) Executive Summary: The EU market is worth 47.8 billion euros. (upper bound: 48 billion, mean value 27 billion, bottom of range of 10.7 billion)

   (p. 17) Conclusions: (Paraphrased) Cheaper/free access will have a short-term tip, as it drives out some of the monopolists currently in the marketplace, and then there will be growth as more companies move into the market.

   (p. 17) The effects of the shake-up of the value chain:

   1. "Direct price effect: the costs of purchasing public sector information from the government will decrease;

   2. Fading price effect: this lowering of costs is (partly) translated into lowered prices in the successive parts of the chain;

   3. Quantity effect: re-users will buy more products, due to lowered prices and increased accessibility;

   4. Entry effect: through the disposal of exclusive arrangements, more companies will enter the value chain, at various points;

   5. Diversification effect: new and diversified products will be developed and brought to the market;

   6. Quality effect: new entrants will force ‘older’ suppliers to increase quality;

   7. Elimination effect: parts of the value chain may disappear since their basis for adding value may be lost;

   8. Competition effect: the country will increase its competitive strength in relation to other countries, resulting in increased export;

   9. Income effect: cash streams of the governmental agencies selling the information will decrease;

   10. Revenue effect: tax revenues will increase under increased economic activities. However, the places where the benefits and losses land are different."

9. Measuring European Public Sector Resources (2006) Final report part 1. European Public Sector Information (PSI) Platform, funded by the European Commission.

   (Paraphrase) This file has numerous case studies of companies getting pushed out of the market by government-licenced monopoly holders who are restricting reuse of the data.

10. The value of Public Sector Information for Cultural Institutions (2009) European Public Sector Information (PSI) Platform, funded by the European Commission.

    Australia:

    (p. 2) "As the costs of disseminating and accessing information have declined, the transactions costs associated with charging for access to information, and controlling subsequent redistribution have come to constitute a major barrier to access in themselves. As a result, the case for free (gratis) provision of Public Sector Information is stronger than has already been recognised.

    "The analysis rests on two key points. First, as noted above, the welfare costs of raising revenue through above-marginal-cost pricing are higher, the higher is the elasticity or price-responsiveness of demand facing information owners. However, the effective price faced by information users includes the cost of access to information and the transaction cost of making a purchase. The net price received by information providers excludes these items.

    "The second, and critical, point developed in the report is that transaction costs of purchase are a fixed cost associated with levying any positive price. Hence, a price for information that is not substantially greater than the transactions cost of purchase cannot possibly yield net welfare benefits when access and distribution costs are low. But in these circumstances, and with high elasticity of demand, the welfare costs of high prices are likely to be significantly greater than the revenue generated.”

11. PSI Working Group on the Economic Case for Marginal Cost/Cost Recovery (2010) European Public Sector Information (PSI) Platform, funded by the European Commission.

    This examines methodologies for measuring the return. No useful case studies.

12. The Value of Geospatial Information to Local Public Service Delivery in England and Wales (2010) Local Government Group, ConsultingWhere and ACIL Talisman.

    (p. vii) "Based on case studies in key application areas and applying a conservative valuation methodology, this study estimates that GDP was approximately £320m higher in 2008-9 in England and Wales than would have been the case without adoption of geospatial information by local public services providers."

    (Seems to flirt with cost-benefit analyses, but explicitly says "we do not imply that access to all government data should be at no charge.")

13. United Nations e-Government Summary 2010. United Nations Department of Economic and Social Affairs.

    (p. 12): 1.1.2 The value of low-cost solutions

    "In California, for example, it cost $21,000 to implement the State’s spending transparency website and its annual operational costs are estimated to be below $40,000. Visitors to the website report unnecessary spending to the government and, after only a few months of operation, the website had already saved the state over $20 million."

    "In a similar manner, the transparency website in Texas, just a few months after launching, had already helped achieve savings of over $5 million."

    (Footnotes are included for both.)

    (p. 18): 1.3.2 The economics of open data

    "Apps for Democracy featured a contest with awards for the best applications built upon data supplied by the district government. In thirty days, at a cost of $50,000 in awards, participants developed 47 applications that would have cost $2.6 million if developed internally by the District [of]."

14. Characterization Study of the infomediary Sector in Spain (2011). Aporta Project & National Observatory of Telecommunications and Information Society (ONTSI).

    (p. 4): Executive Summary. Economic and employment data of the sampling universe:

    "1. The business volume directly associated with the infomediary activity of the studied companies reaches between € 550 and € 650 million.

    2. This turnover estimation would place the infomediary sector at the same level as other digital content sectors. According to ONTSI data, in its Annual Report on Digital Content in Spain 2010, within the € 8,000 million generated by this sector in 2009, the video game industry (SW development) and online advertising generated a turnover similar to the infomediary sector, around € 650 million.

    3. The infomediary activity of the analyzed companies represents between 35% and 40% of their total activity, which in its turn represents a total turnover of more than € 1,600 million.

    4. In general, the subsectors of the infomediary companies are of differing importance within the framework of developing re-use activity, confirming that these companies often operate in several subsectors simultaneously.

    5. Between 5,000 and 5,500 employees are directly assigned to activities related to re-using information, in the companies analyzed on this research.”

Additionally, worth a look:

1. European Commission commissioned Exclusive arrangement studies

   "(EU) Directive 2003/98/EC on the re-use of public sector information places obligations on EU Member States with respect to exclusive arrangements. The Directive states:

   'Article 11

   Prohibition of exclusive arrangements

   1. The re-use of documents shall be open to all potential actors in the market, even if one or more market players already exploit added-value products based on these documents. Contracts or other arrangements between the public sector bodies holding the documents and third parties shall not grant exclusive rights.

   2. However, where an exclusive right is necessary for the provision of a service in the public interest, the validity of the reason for granting such an exclusive right shall be subject to regular review, and shall, in any event, be reviewed every three years. The exclusive arrangements established after the entry into force of this Directive shall be transparent and made public.

   3. Existing exclusive arrangements that do not qualify for the exception under paragraph 2 shall be terminated at the end of the contract or in any case not later than 31 December 2008.' "

European Union

The Open Data, Open Society Report by Marco Fioretti (not peer reviewed yet, part of research funded by the DIME network). The same research includes an ongoing online survey for all the EU-15 local administrations.

Case study Yellow milkmaid paper on reputational issues from closed information.

Popular press

1. How did weather data get opened?

   It seems that the American weather data is supporting a $1.5 billion industry.

2. Case Study: How Open data saved Canada $3.2 Billion

   In Canada, $3.2 billion charity fraud was exposed thanks to open data.

3. The goldmine of opportunities in Gov 2.0

   BrightScope.com: a website to compare retirement plans (from US government 401K data). 2009: $100,000 in revenue; forecast 2010: $3 million; forecast 2011: $10 million.

   (There are other apps linked from this story, but their turnover/impact isn't listed).