[1990] in Commercialization & Privatization of the Internet
EDGAR
daemon@ATHENA.MIT.EDU (James P Love)
Wed Jan 15 14:53:38 1992
Date: Wed, 15 Jan 92 14:51:21 EST
From: James P Love <LOVE@pucc.PRINCETON.EDU>
To: com-priv@psi.com
Marvin Sirbu has taken issue with my statement that the taxpayers
had paid for the SEC's EDGAR project. He said:
In fact, it is my understanding that the contract price
offered by Mead for the development of Edgar was far below
its actual costs. Mead offered this concessionary price in
return for the opportunity to earn revenue by selling access
to the public. To rewrite the contract now by changing
Mead's exclusive right to resell Edgar would also require
renegotiating the price paid by the SEC for Edgar in the
first place. One can quarrel with the decision of the SEC
to make such a bargain, but it did transfer the cost of
building the system from the general taxpayer to the users
of the information.
Mead's actions are not unlike those of the 17th century
English postal coach operators who would agree to carry the
King's mail for free in return for a "patent" (i.e.
franchise) granting them exclusive rights to carry the
public's mail for a fee.
Mr. Sirbu is wrong about the current SEC contract, but he would
have been right several years ago. The original EDGAR proposal
would have involved a barter, trading the exclusive commercial
rights to provide online access to government records in return
for free services to SEC employees. The Patent and Trademark
Office proposed a similar arrangement. These contracts were
controversial, and Congress passed laws prohibiting exclusive
rights to either database.
The present EDGAR contract involves several companies, including
the prime contractor, BDM, as well as a number of subcontractors,
including Mead Data Central, Compuserve, and others. Mead will
run two parts of the EDGAR system. These are described in detail
in my letter's note about the control of the EDGAR database.
1. Mead is required to sell bulk copies of the SEC filings in
electronic form at regulated prices. These services are
designed to serve the needs of commercial data vendors.
Level I service will involve online access to three days of
back filings, plus overnight delivery of magnetic tapes of
all filings from the current day.
Level II service is overnight delivery of magnetic tapes of
eight subsets of SEC filings from the current day.
For these service, Mead is allowed to charge prices that
recover all of Mead's costs, plus a reasonable profit.
Firms that buy data from Mead are free to repackage it and
resell it as they see fit.
2. Mead is also given a contract to provide online full text
search and retrieval of the documents to 650 SEC terminals.
Mead will be paid $1.8 million per year for this service, a
little less than $2,800 per terminal. Mead is also paid to
set up its database, train SEC staff, and a number of other
items. Mead will receive about $13.5 million for this part
of the contract.
Perhaps Marvin Sirbu thinks the $13.5 million Mead receives for
this service is below market. I don't think it is. Clearly it
will lower Mead's costs of entering the retail market for this
information, as compared to other online service companies.
I don't quarrel with Mead's right to retail this information to
the public, and I don't quarrel with any other firm's right to
retail this information to the public. We all hope that
competition will bring great new products into the market place
at great prices.
What I do object to are:
1. the elaborate steps that the SEC and Mead have taken to keep
the machine readable copy of the database out of the hands
of the government (a machine readable copy of the EDGAR
database is kept in an escrow account, held by a non-
government party),
2. the fact that Mead, which has possession of the government's
database, will not be required to sell tapes of cumulative
transactions, or maintain an inventory of back files (Mead
will only sell tapes of transactions from the _current_
day),
3. and that the government will have to negotiate with Mead to
broaden public access to the data, either through online
services, or by offering CD-ROM products that meet the
public's needs. Mead clearly has a conflict here, since any
new government products and services will compete with its
unregulated retail sales.
The public should have the right to choose between the government
and private commercial vendors to get the products and services
that it wants, but it should not be required to use commercial
vendors to obtain public information.
Right now, for $62 million, the federal government is buying a
system that gives the public access to paper blow-ups from
microfiche, and gives commercial vendors machine readable
records. The taxpayers are buying a search and retrieval system
that government employees can use, but the taxpayer are told to
use commercial vendors. It's a great system for Mead, but I
think the government can do better for the rest of us.
James P. Love, Director voice: 609-683-0534
Taxpayer Assets Project fax: 609-258-2809
7-Z Magie, Faculty Road bitnet: Love@pucc.bitnet
Princeton, NJ 08540 internet: Love@pucc.princeton.edu
