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If adequate government funding can be relied upon, the free fundamental data model delivers greater economic benefits than the alternative models. The larger benefits result from increases in the use of fundamental data that would occur because of the agency providing data free or at a very low price, and flow-on effects of increases in competition and innovation in downstream markets for products and services that use fundamental data. However, the achievement of these benefits also requires that certain other conditions hold, notably that:
– the government agencies that produce the data do not rely on the purchasing decisions of data users to provide signals to guide decisions on the quality of the data; and
– the benefits of free provision of fundamental data are not negated by fewer market opportunities for competition and innovation by non-government producers of fundamental data.
Where these conditions do not hold, the benefits of the free fundamental data model may not be sustained and models that allow for cost recovery are superior in the longer term. The comparative analyses of the current study show that the full cost recovery model is superior where the free fundamental data model results in deterioration in the quality of fundamental data over time due to funding constraints or misspecification of data quality.
The comparative analyses also show that the price discrimination model achieves most of the economic benefit of the free fundamental data model, particularly where there is a significant government share of data use. The price discrimination model provides a trade-off between the independent-funding benefits of the full cost recovery model and greater-use benefits of the free fundamental data model.
At one end of the spectrum of models is the ’full cost recovery model’ in which data are priced to recover all of the costs (the ‘full cost‘) of producing, maintaining and distributing fundamental data from users. At the other end of the spectrum lies the ‘free fundamental data model’ in which fundamental data are priced to recover only the marginal cost of distribution. In between these two models is the ‘price discrimination model’ which applies differential pricing according to customer type. The ‘Commonwealth/State model’ is a hybrid of the above models. The alternative pricing models have different consequences for the economics of data production and consumption.
A static welfare analysis of the pricing and access models shows, as was demonstrated in previous reports, that changes in welfare are largely a function of the cost of public funds incurred through funding the production of fundamental data and the deadweight loss that is incurred through a cost recovery pricing model.
For a change between models in the opposite direction to that indicated, the welfare change is equivalent but of the opposite sign.
Find this article at: http://www.crcsi.com.au/assets/Resources/80fe8b41-721d-47b6-80bd-075bc64885b3.pdf report 2 starting after p.137