Weather Data--Implications of Increased Privatization
I would like to thank you for asking me to be here today. Clearly, the Weather Channel has a vested interest in environmental data, since that is the essence of our business. I want to talk about weather data and the implications of increased privatization. I know that the word "privatization" conjures up some very negative connotations, but I want to work my way through this topic and hopefully build some other perspectives that we all have to think about as atmospheric scientists.
I'll start with a brief background, most of which is very elementary. I am going to focus on the weather side of environmental data, since that is really what I do.
Historically, the government has been responsible for all routine weather observations in the United States, such as surface weather and upper-air observations. During the past decade, we've seen quite a few high-density surface observation "meso-nets" developed and implemented by the private sector. Sometimes these observations are accessible via the Web or local television; other times they are not. We also have seen the proliferation of high-end local television radar. In fact, now some of these radars are challenging the technology of the National Weather Service Doppler network.
So we are seeing quite an increase in the amount of privately held environmental data. We have had a lot of discussion about economic factors this morning. I believe these factors suggest that the trend toward data privatization not only will continue but will probably accelerate. We are all thinking about the increased value of weather information. We have had discussions this morning about the value of weather information from a risk management point of view in the weather derivatives market. This is being fueled by an increasing awareness of the accessibility of data. We are providing more data, better data, and higher-density data. So their value to the economy is increasing.
There will continue to be incentives for private industry to invest in this information. We heard Lynda Clemmons tell us earlier that she sat across the table from the folks in the U.K. Met Office saying that she would pay them $2 million a year for their information. All they would have to do is take her check, and she would take care of the rest. Clearly, the profit incentive is significant.
Technology is becoming more sophisticated, while the cost of technology is dropping. Observation programs that were once the exclusive domain of the public sector are now in the domain of the private sector. Also, consolidation is occurring in the media business. It seems to happen every day: AT&T buys TCI, a very large cable company; Time-Warner and America OnLine merge to create a megagiant. Consolidation provides these organizations with the wherewithal to make investments they would not have had the cash flow to do as single entities. So some very impressive mass building is taking place in an industry that could have a future bearing on environmental data. At the same time, federal agencies are facing significant budget pressures. All of this clearly points to an increased opportunity for the private sector to expand its involvement in environmental data.
Use of environmental data falls into two broad categories: operations and research. If you look at the operational use of environmental data, a couple of things stand out. It is usually time sensitive. The closer to real time, the better. The products that are created from time-sensitive data are very perishable. Their shelflife is limited. After a certain amount of time, their value will drop to zero. Also, property rights become a significant factor. If I have access to environmental data that my competition does not have, then I have a competitive advantage in the market.
A couple of other points about operational data usage. Government data are free, or full and open, as Dr. Baker said earlier. There is a modest user fee involved, but there is no charge for the data. Private data may have restrictions, particularly in real-time usage, and they are usually not free and open.
When we look at data in the research and education domain, a couple of key points emerge. Research use of environmental data is usually not time sensitive. Research does not have to be real time in order to be successful. In research, both government and private data are generally free and open.
I want to spend just a few moments talking about the implications of increased private data. I used to think that as we began to live in a world where environmental data became the intellectual property of private enterprise, this would be more problematic than it would be helpful. However, having thought this through to a greater extent, I have changed my opinion. I have come to the conclusion that it is going to be beneficial. I would like to give you some of my reasons, which you can absolutely disagree with.
First of all, when private industry makes an investment in environmental data, it is doing so because it sees market value. Once the investment is made, the availability of these data is going to increase. There is a marketing sophistication in the private sector that does not exist in government agencies.
With private data will come expanded products. We will see a greater depth, breadth, and volume of products that will supplement the products from in the public sector. The investment in private products will lead to increased research linked to these products. Continued research and development on the data will expand their value in the marketplace, and the cycle will continue.
Thus, private investment will spur scientific advancement. As a result, public data programs and public research should be spurred, leading to higher-quality public products and services.
So, in summary, do not look upon privatization as a negative, although I don't discount that there could be some access issues. I do believe, however, that the commercial meteorological services that have put data in a restricted zone have led to the notion that when data are privatized it is bad. I suggest that this notion may not apply when experienced private companies invest in data sets and then use their marketing, packaging, and presentation expertise to create products and services that are successful in the market. I think that we all benefit from the open market dynamic. I will conclude with the familiar quotation, "A rising tide lifts all boats."