Earth Observation Data Sharing: Economic Issues

Moving Forward on Data Policy and Cooperation in Earth Observations

Bilateral U.S.-China CODATA Workshop National Academies of Science, Secure World Foundation

August 25, 2014

Mariel Borowitz, PhD Sam Nunn School of International Affairs

Georgia Institute of Technology

Outline

•  Economic Attributes of EO Data •  Conflicting Economic Views of Data –  Public Good vs. Commodity – Key Uncertainties –  Stakeholder Concerns

•  Examples from U.S., Europe, Japan – Economic Models: Landsat

•  Key Uncertainties Revisited •  Conclusions

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Important Economic Attributes of Earth Observation Data

1.  EO Data has significant economic value –  Weather, climate, aviation, agriculture, mining, etc.

2.  Non-rival in consumption –  One person’s use of data does not diminish amount available for others

3.  Excludability –  Information often thought of as non-excludable –  But satellite data can be kept secret, or put under copyright/ licensing

agreements 4.  Increasing returns to use

–  The more data is used, the greater the social returns –  Kenneth Arrow, 1962, “Allocation of Resources for Invention”

5.  Positive Externalities –  Use of EO data provides benefits that extend beyond original user –  Scientific understanding, value-added products

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Conflicting Economic Views of Data

Public Good •  Key Attributes

–  Non-rival, non-excludable –  Positive externalities

•  Implications for efficient use –  Must be developed by gov’t

(industry will under-produce) –  Share data as widely as

possible (maximize use/ social benefit)

–  Charge marginal cost (generally zero)

Commodity •  Key Attributes

–  Economic value –  Data can be excludable

•  Implications for efficient use –  Data can be efficiently

produced by private industry –  Restrict access to data, charge

a fee for use, determined by supply and demand •  Cost recovery •  Commercialization

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Three Key Uncertainties 1.  Is there a viable commercial market? –  Is there sufficient demand to support a commercial

market? –  Size/ form of the market: natural monopoly,

competitive? 2.  What is the elasticity of demand? – How does demand react to changes in price

3.  How can the benefits of EO data be quantified? – Revenues are easy to quantify (in dollars) – How to quantify other benefits (e.g. scientific

understanding)

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Stakeholders •  Agency officials

–  Best achieve agency mission –  Maximize use/benefits -

science, knowledge •  Free and open data sharing

•  Legislative/ budget officials –  Efficiency, budget pressures

•  Cost recovery •  Commercialization

•  Commercial Industry –  Profit

•  Data sales •  Government investment/

subsidies

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EO Data Policies in U.S., Europe, Japan

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NASA NOAA USGS ESA EUM JAXA JMA<1980

2000

2010

1980

1990

Unofficial)Sharing/)Bilateral)Agreements/)International)Ground)StationsCost)Recovery/)Commercial)Sales

Tiered)Policy

Nearly)All)Data)Freely)Available

Free)and)Open)Policy

Economic Models: Landsat •  Data originally freely available

–  Technology for sharing data lacking –  Established value of data

•  Efforts to sell data, commercialize program –  Higher costs led to fewer sales

•  Anecdotes of U.S. agencies purchasing similar, less expensive satellite data from another nation

–  Profit model led to even higher costs, fewer customers – conflicts with public benefit goals of government

•  Commercialization deemed impossible at that time, tiered policy adapted

•  Data made freely available online in 2008 – huge increases in downloads, use –  Product: medium-resolution, science-focused system –  Substitutes: similar data available free/inexpensive from other sources –  Compliments: increase of computing power, etc.

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Uncertainties Revisited: Is there a viable commercial market?

•  Evidence suggests “no” in most cases –  Dependent on specific product (resolution, etc.) –  Particularly for low resolution data, data whose primary use

is science •  Also depends on cost of supply –  Could new low-cost start-ups change calculation?

•  Importance of substitutes, complements –  Data from non-satellite sources, satellite data from other

nations (decrease demand for commercial products) –  Availability of computational capability, recognition of data

uses, GIS systems, growth of big data (may increase demand)

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Uncertainties Revisited What is the elasticity of demand?

•  Relatively elastic •  Change in price leads to

large changes in demand –  Even low price leads many

to forgo use of the data – particularly science users

–  Trend seen in tiered policies as well (related, non-monetary barriers)

•  Rapid adoption of freely available data (e.g. Landsat)

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Uncertainties Revisited How can the benefits of EO data be quantified?

•  Revenues are easy to

quantify (in dollars) –  Often relatively low

•  How to quantify other benefits (e.g. scientific understanding) –  Value-added industry

seems to be much larger with free data

–  Difficult to quantify science, societal benefits

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Conclusions •  In practice EO satellite data seems to function more like

a public good than a commodity –  Increasing returns to use, positive externalities

•  Social benefit maximized when data made available free (maximizing use)

•  Data under-produced by industry –  Commercial industry not viable in most cases –  Ethical concerns play an intervening role (e.g. weather,

natural disasters) •  Future role for industry? –  Providing data not already produced by government –  Producing data at a lower cost

•  Innovative arrangements to allow free data sharing

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Thank you Moving Forward on Data Policy and Cooperation in Earth Observations

Bilateral U.S.-China CODATA Workshop National Academies of Science, Secure World Foundation

August 25, 2014

Mariel Borowitz, PhD Sam Nunn School of International Affairs

Georgia Institute of Technology