Can cities monetize their data?

The North Texas Innovation Alliance (NTXIA) is researching how member cities and counties can boost revenue, drive digital transformation and support economic recovery with new financial models and technology solutions, including data monetization.

The group issued a call for solutions in this area in June and received 35 responses.

“What we saw in the responses was a combination of all you would expect,” NTXIA Executive Director Jennifer Sanders said. Some suggested process efficiencies yielding increased revenue; others were around overall asset monetization via the internet of things and data capture, while others were data exchange models.

NTXIA set up a series of lightning talks with vendors in four categories of monetization, including data monetization, she said. After gauging which entities are most interested, NTXIA evaluates whether they have an adequate baseline infrastructure already in place and “then see if a pilot is something that the group would want to do,” Sanders said.

One way that cities could make use of data optimization is by working together on a regional recycling center, said Ian Hutchinson, management and budget analyst for Oklahoma City, Okla. That could help the cities see where recycling demand is and sell the data to a recycling organization.

“The government should always remain adaptable and flexible when it comes to the sources of revenue that it has” because demand from residents is always increasing, Hutchinson said. “People are only going to expect better parks and better roads and more hours of community centers. There’s no projected decrease in that demand from people, and at the same time, the long-term projections for revenues are trending downward.”

Still, the amount of revenue coming from data monetization will never compare to what localities get from, say, sales and income taxes, he added. In Oklahoma City, revenue from administrative charges, which is what this proposed recycling data plan would fall under, makes up only 3% of the budget. But that revenue line is currently down, so if data monetization could be used to at least break even, that would produce some value, he said.

In Texas, Sanders has looked at using a “freemium” system with some data being available for free and some subscription-based. For instance, corporations sometimes ask for very large datasets through Freedom of Information Act requests, which can take staffers time to compile. If cities could charge for that data and it offsets the cost of paying staff, it could be worth it.

Showing value is the best way to get around the ethical dilemmas associated with government data monetization, Hutchinson added.

“I think there are more ethical, moral dilemmas in the public sector than you have in the private sector,” he said. “There’s a fundamental conflict there with selling data because that’s just not seen as something the government should be doing.”

For one, government data has traditionally been thought of as belonging to the public. So if residents are already paying through taxes to fund government work, they don’t want to have to pay again for the data, he said.

But “if governments can prove that they’re not just trying to get money out of people for data, if they can prove that this data and the money that they get for it can be used to produce things that are of value to the citizen, if … they believe that the value of the things they’re giving outweighs the costs for the privacy,” it could work, he said, but all of that “would be a hard thing to do.”

“That’s always the bottom line: How would this improve quality of life in a way that everybody’s comfortable with?” Sanders added.

Oklahoma City is not currently looking into data monetization, Hutchinson added. The data collection and processes are not at a place that would produce value. “It’s still something that is waiting for an early adopter champion to prove that it makes sense and can be worth it for other cities to start to think about it,” he said.

The potential for public entities to monetize data is growing, according to ABI Research, which states that cities are looking into monetizing data from connected assets as a way to supplement revenue from taxes.

“The arrival of 5G-enabled edge cloud capabilities will further facilitate the sharing and monetization of mission-critical, low-latency data, enabling remote and automated traffic management, driverless transportation, and emergency response management,” Dominique Bonte, vice president of end markets at ABI Research said in an August press release. “It will drive the value of connected infrastructure and asset data to around $2 billion by 2030 globally.”

Some state agencies in Texas already sell data. For instance, the Department of Motor Vehicles made more than $3 million in 2019 by selling drivers’ personal information to more than 2,700 government agencies and private companies, according to a news report. A law passed this year made such data selling illegal, however.

In Denmark, the City Data Exchange (CDE), an agreement between Copenhagen, the Capital Region of Denmark and Hitachi, which built the tech platform for the exchange, allows for data sharing between public and private entities.

It “has closed a gap in regional data infrastructure. Both public-and private sector organizations have used the CDE to gain insights into data use cases, new external data sources, [General Data Protection Regulation] issues, and to explore the value of their data,” according to a March 2018 report.