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Reform of government and the future performance of national surveys

by R. Groot
Computers, Environment and Urban Systems ()

Abstract

The assumption of this paper is that Governments pursue the following strategic objectives with respect to geospatial information, as produced by National Surveys (including Cadastres): 1. for its own purposes, i.e. to govern, it must be assured of unlimited and efficient access to National Survey material; 2. society should have the broadest possible "free", but not "cost free", access to the products and services of National Surveys because this increases "positive externalities" for society as a whole; and 3. the products and services of National Surveys, including Cadastres, should, in a planned fashion, become independent of government subsidies. The article argues that under the constraints of those objectives, the regulatory environment of the Public Service (in parliamentary democracies), is counterproductive to the requirements for economic efficiency in pricing and distribution of national survey products and services. Because National Surveys and Cadastres are natural monopolies, the arguments are based on economic theory of the regulation of natural monopolies. Due to the introduction of Information and Communications Technology (ICT), the client community has ubiquitous access to survey and geospatial data processing technology, as well as a growing supply of commercially available substitutes for the products and services of the conventional natural monopolies. Hence, the paper first defines the products and services content of the natural monopoly in the modern ICT and Geospatial Data Infrastructure dominated environment for the case of a National Mapping Agency (NMA) which includes, in this case, the Cadastral Surveying and Mapping. Having defined the products and services in the natural monopoly, all other (value-added) products and services are by definition placed in the free competitive market. The paper goes on to demonstrate that it is in the interest of society that the NMA or Cadastre competes in this market in order to realize economies of scope. The "parity-principle formula for bottleneck service pricing" (Baumol, Ordover & Willig, 1997. Parity pricing and its critics: A necessary condition for efficiency in the provision of the bottleneck services to competitors. Yale Journal of Regulation) provides the necessary and sufficient condition under which a level playing field can be created for all competitors that require the monopolist's (NMAs) assets for the value-added production in the free market. However, an independent regulator must supervise the application of this principle. Next, the issue of pricing is dealt with in light of meeting the policies on maximum output and diminishing subsidy. As the government has set the broadest possible distribution as a strategic goal, the NMA will have to act as an output maximiser as opposed to a profit maximiser. Output will therefore have to be set at a point where economic profit is not negative, and this will determine the unit price. These criteria lead to a set of management objectives and an accountability framework for NMAs. It is only at that point that the discussion on the desirability of more independence from the Public Service regulations, of which privatisation is the extreme form, becomes meaningful. The article concludes that outright privatisation, that is, placing the assets of the NMA and all decision-making power over them in the hands of private individuals, is in conflict with the first strategic objective. Furthermore that a regulated monopoly and output maximisation are unattractive conditions for potential franchisers, concessionaires or management contractors. Hence an appropriate solution would be to put the organization at arms-length from government within the accountability framework developed but established in commercial law and without tax benefits. A Cabinet level Minister must be the politically accountable regulator of the "level playing field" and the pricing policy. ?? 2001 Elsevier Science Ltd. All rights reserved.

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