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Seeking Value, Not Rent, in Government Data Monetization

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Ian Hutcheson
March 19, 2020

The most coveted resource in the Information Age is data. Government control of information has always been a cornerstone of state power. In today’s world, corporations rival and outpace many governments in shaping mankind’s relationship with data. At the same time, local governments around the world find themselves constrained under demands for increased services with limited prospects for increased revenues. The prospect of monetizing data would therefore seem an appealing avenue for governments to both assert their role in helping manage the exchange of information and supplement their financial capacity to meet demands. Selling data is a prospect that local governments should remain open to. By keeping their focus on the broader value that economies of data can generate for society, cities can secure a dependable source of revenue that is viewed legitimately by their residents.

Bytes Beyond Belief

Data in the Information Age is a seemingly inexhaustible resource. The International Data Corporation estimated the global reserves of digital information to be 33 zettabytes in 2018, equal to 33 billion terabytes. Unsurprisingly, Big Tech easily competes with the most powerful governments in the world in data processing capacity. In 2013, the U.S. National Security Agency claimed to sift through 29 petabytes of data each day (1 zettabyte equals 1 million petabytes). Five years earlier, Google estimated it processed around 20 petabytes per day. The rise of the Smart City in recent decades has helped reserve a place for local governments in the Information Age, with even small cities capable of collecting up to eight terabytes per day. This has prompted some city governments to consider the opportunities which enhanced data collection presents for monetizing information and diversifying revenue streams.

Revenue Realities

Although the fiscal health of local governments in the United States has rebounded since the Great Recession, recent trends paint a pessimistic picture for revenue growth in the coming years. Since 2016, year-over-year changes in general revenue growth have decreased for cities, with revenues projected to decline in 2019. Nearly a quarter of local government general revenues come from charges and fees, which encompass various payments from users in exchange for access to services or resources. Revenue from data monetization would fall under this category and if similar charges are any guide, sold data is unlikely to make a major impact on municipal budgets. Of the $460 million from charges for services included in the City of Chicago’s 2020 budget, just $1 million comes from charges for information. Even if data monetization is pursued aggressively by cities, it is unreasonable to expect it can provide a large influx of cash for cities.   

Data Gathering for Good

The technology available to governments in the Information Age settles the issue of whether data can be monetized, but the fundamental issue of whether public information should be sold is a thornier issue. Research indicates that Americans remain skeptical about modern data mining, but they also view government data collection that benefits certain public goods more favorably. A November 2019 survey by the Pew Research Center found that while most Americans are uncomfortable with the present scope of public and private data collection, they view government information gathering as more of a potential benefit. Additionally, respondents were more accepting of data collection by schools for improving education then they were of social media companies for identifying mental health problems. If cities can demonstrate to their residents that data monetization can benefit society, these efforts will be viewed with less suspicion by a public that has grown weary of profiteering at the expense of privacy.  

Money for Something

Plans for data monetization remain theoretical for many local governments, but there are a few cities that may serve as reference points. The City Data Exchange (CDE) in Denmark was a public-private partnership launched in 2015 between the Municipality of Copenhagen, the Capital Region of Denmark, and Hitachi. The partners envisioned the CDE as, “A marketplace for the exchange of data between public and private organizations,” as stated in a March 2018 report published by the governments on the initiative’s takeaways. These findings outlined in the report indicate that a key element to successful data monetization is demonstrating the value that paid-for data can unlock for users. Cities able to prove the added sophistication and quality in datasets that is exchanged for cash when data is monetized are more likely to legitimate their efforts, thereby securing a stable source of revenue that is not viewed as naked rent-seeking.

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Through the adoption of new technologies that have massively enhanced their data collection capacities, city governments have positioned themselves as formidable gatherers of information. With this power comes public suspicion of data hoarding cities that speak increasingly of monetizing information on their residents. It would be a misstep for local governments to shun data monetization in acknowledgement of these concerns. A wiser approach would be to concentrate first on the value that selling data can unlock for their residents. By seeking value before revenue, cities can convert data into a sustainable resource that is above ethical reproach.

Author: Ian Hutcheson, MPA is a Management & Budget Analyst for the City of Oklahoma City and the President-Elect of the ASPA Oklahoma Chapter. He is a 2018 graduate of the Master of Public Administration program at the University of Kansas. Ian’s professional areas of interest include city management, finance and budget, economic development and urban design. Contact: [email protected]. Twitter: @ihutch01

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