Locus Association Commentary on Ordnance Survey Proposals
18th May 2009
The Shareholder Executive has added a further review to the several that have been carried out of Ordnance Survey over the last 7 years. It suggests some fundamental changes, as have the others, and sets milestones at 6 and 12 months when further reviews will take place.
We welcome the emphasis on promoting innovation and the wider use of OS data. We also welcome the drive for greater efficiency and cost reduction and the simplification of pricing and licensing.
We also accept the continuation of commercial pricing; however, we would like to see prices based on an independently-audited true cost of production, plus a small margin, rather than having prices set by the OS itself without any independent scrutiny. We also request that the justification of the rejection of marginal pricing for core data (as recommended by other reports) be published, as marginal pricing appears to offer considerable advantages to both the public and the private sector.
We have been waiting a long time to see recognition of the importance of a new approach which would include the encouragement of a more vigorous private sector. In our opinion, re-use of OS data by the private sector has been seriously constrained by OS licensing arrangements. Many of those same concerns were echoed in the OFT’s CUPI study. We hope that this new policy approach will mark a turning point. Its implementation is urgent.
Our conclusion is that if the new approach is implemented in the best possible way, it may be possible to reach the limited objectives set out. However, there are significant pitfalls which we would like to draw attention to and important implementation issues that will be critical to achievement of the objectives.
The ShEx/OS proposals appear to be a re-tuning of the existing model rather than creation of a new model. We believe OS needs a business model with the following characteristics. It should:
- · be straightforward to manage;
- · support OS customers and partners rather than protect OS;
- · allow OS to grow confidently and build value (e.g. for possible privatisation), but this growth should be based on a level playing field, without a continuance of the high level of commercial friction which has existed between OS and its customers.
The UK economy needs to encourage private sector enterprise and innovation, especially in the GI sector, which could offer so many opportunities and where UKSDI and INSPIRE may require new investment. Enterprise and innovation are most likely to occur where market conditions are fair and relatively transparent and the boundaries of the dominant State operator are also clear. Choice and fair competition offer operational efficiency.
All these overarching ambitions need to be realised if the best results are to be achieved. We have reservations as to whether the new approach, as currently framed, will achieve them.
There are a number of specific points that we believe need further consideration:
- 1. Prices should not be set higher than the production cost of the relevant activity, plus a reasonable profit, otherwise innovative use will be inhibited. This does not appear to be what is proposed. Instead the product price will apparently be determined by OS according to use and the risk of product cross-subsidisation will continue.
- 2. Licensing must be simplified in a comprehensive way. There should be a basic right to use data without constraint whether the re-user is in competition with OS or not.
- 3. The dividing line between basic activities and the value-enhancing activities of the trading entity should be drawn in a way that limits the basic activities to those that are truly basic, otherwise again innovation will not be successfully encouraged. This is a particular problem that must be addressed, and not only in respect of the proposed new commercial entity (see also below).
- 4. Sharing of information across the public sector should be undertaken in a way that encourages competition from the private sector and avoids the danger of shutting it out. We thus have very strong concerns about proposals for public sector agreements to acquire OS data without fair competition from the private sector.
Several of OS’s services, which OS has in the past defended as part of its “public task”, are now provided successfully by private sector companies. In two cases, these private sector services would probably not have been developed if it had not been for public procurements. In both cases they not only add choice for the purchaser but are considered by many in the public sector to be superior to OS offerings (and are being used by them). A single public sector agreement would largely close off these opportunities.
Nonetheless, it might save time and money for all concerned if the public sector licence for geographic information was in a standard form and agreed in advance by OS and the private sector for all procurements.
- 5. The pledge that the trading entity will operate on the same terms as the private sector as regards use of basic data is welcome but it is unclear to us how this might operate in practice. It would seem that a true upstream/downstream separation, as recommended by the OFT, is not intended and we believe this opportunity should not be missed. Separation should occur, and it should be strictly enforced, be transparent and include licensing arrangements.
- 6. Given the model will continue to be a fundamentally commercial one there must be a Regulator with strong and direct powers to enforce fair trading. The existing powers, such as they are, do not appear to have been reinforced although several of the government’s own reports pointed to the need to do so. We note that OPSI will provide “enhanced oversight” and would like clarification of what is intended.
- 7. We welcome the proposal to agree OS’s “Public Task” in consultation with stakeholders although if the majority of the above changes were successfully implemented then the definition of public task would become of much less concern. Hopefully too, industry will be recognised as a key stakeholder and included in the process.
– ENDS –
Notes for Editors:
- 1. Locus was established in autumn 2005 and formally launched on 26th January 2006. The Association’s President is a former Director General of the OFT and Oftel, Sir Bryan Carsberg.
- 2. The Association exists to raise awareness of, and promote the development of, a healthy and competitive private sector in relation to PSI. Locus acts as a forum for exchange of information, keeps its members up to date with latest policy developments, and provides advice and guidance. Our members recognise the potential of PSI, but also the benefit of uniting to address some of the challenges and pooling resources to meet them. It is worth noting that the particular nature of the PSI market structure, where individual private sector organisations have limited influence, lends itself to the development of a trade body.
- 3. Enquiries: Harriet Crosthwaite - 020 7340 6260 or email@example.com