Letting consumers share the value of their data

The increasing awareness of consumer data exploitation has motivated proposals to share more of that value with consumers in monetary form, not just as services. The discussions are evolving around three approaches: a data tax, data unions, and data clearinghouses.

download the paper

Data tax

A data tax is the simplest, but least flexible and market-oriented approach. Taxes on natural resources owned by communities have well-known precedents. For instance, in Alaska, oil companies pay taxes into the Permanent Fund. The people of Alaska receive about $1500 each from this fund every year.

With data considered natural resources, why not tax their use? Chris Hughes, a co-founder of Facebook, suggested that companies whose profit strongly depends on their use of consumer data pay a tax. A 5% tax on their revenue could yield more than $100B a year, or about $360 for every American adult.

While simple in concept, this approach could prove complex in practice, as well as controversial from a legal perspective. Would national governments collect this tax? Would the tax be collected at the service source or at the place of consumption? What are the criteria to select the companies to be taxed? Would all have to pay the same percentage of their revenue? How would the revenue be distributed to consumers? These questions would draw extensive discussion, lobbying, and legal challenges. The complexity of the political environment and big tech’s power make this a difficult approach to pursue.

Data unions

Data unions that negotiate on behalf of consumers represent a somewhat less top-down and more market-oriented approach. It would model the consumer-side data market similar to the labor market. The concept that data is labor has been receiving quite a bit of discussion recently. It is mentioned in a leaked draft of a forthcoming European Data Governance Act, stating that “ …(27) …data cooperatives as intermediaries between data subjects and potential data users in the economy … “. Andrew Yang proposed a data tax in his 2020 presidential campaign. Pursuing this approach, agents negotiate on behalf of large groups of consumers with data users. A legal framework may require legislation similar to the National Labor Relations Act of 1935. Just as labor union members, data union members would have to be ready to go on strike to back up their negotiators. The monopoly position of the biggest of the big tech companies in their fields would make this a difficult negotiating posture.

Data clearinghouses

In yet another, more market-oriented approach to the consumer-side data market, consumers voluntarily pool their data in clearinghouses that like today’s data brokers, but on behalf of consumers. Rather than operating as a collective, clearinghouses act as personal data managers.

Several start-ups are exploring ways to mediate between consumers and data users, trying to aggregate data from enough consumers to create a critical market mass.

· Streamr is proposing a decentralized platform to monetize consumer data.

· Universal Data Income (UBDI) wants to sell only the insights from consumer data, not the data itself.

· Ocean Protocol in contrast wants to sell consumer data to AI companies.

· Polypoly wants to build a distributed architecture for consumers to rent their phones’ unused computing capacity to enterprises. Consumer data Is processed locally, only results are transmitted into the cloud. Consumers are compensated for their data and the use of their computing capacity.

· Killi’s paycheck program wants to allow consumers to share specific personal data in return for a weekly cash payment.

These startups are the tip of the iceberg of creative approaches being explored in the marketplace. Modern cryptographic technologies such as crypto tokens and blockchain can enable solutions that have become technically feasible only recently.

Creating a level playing field

Consumers usually are at a distinct disadvantage when their interests conflict with corporate interests. In cases where the power imbalance proves to be too uneven, governments sometimes step in with laws and regulations to level the playing field a bit. Examples are warranty laws or laws about information disclosure.

Consumers have long had access to their credit agency data as well as the resulting credit ratings. This access includes the ability to correct erroneous data and to freeze their credit records to reduce identity theft. The credit reporting industry did not volunteer this access. The 1970 Fair Credit Reporting Act requires it.

While the use and misuse of consumer data have exploded during the last decade, only recently have the associated problems started to receive public attention.

Despite significant push-back by big tech, governments have started to create regulatory frameworks to increase the consumer data transparency, and to give consumers a measure of control over their data.

In 2016, the EU has issued the General Data Protection Regulation (GDPR), a comprehensive and complex regulatory framework. It requires opt-in by consumers for data collection and promises them access to their data, including an ability to correct errors. It requires that the data is only used for the purpose stated at opt-in. The GDPR also includes the right to be forgotten, requiring the deletion of outdated data or data for which the consumer has retracted permission. The implementation of the GDPR is still evolving. Major lawsuits are ongoing to clarify its practical impacts. Contention results from the fact that the GDPR nominally just applies to EU countries, but the Internet is global. Many affected services reside in the US where regulations to date are weak.

Regulation in the US is starting as well. The 2018 California Consumer Privacy Act (CCPA) does not require opt-in permission for the data collection. Instead, it has fairly comprehensive rights about access, the ability to delete data, a right to opt-out from the sale of data, and a right to non-discrimination.

Over the last year, antitrust discussions and lawsuits by US and European governments about the monopolistic behavior of some big tech companies have intensified. The outcomes will definitely change the associated industries. Combining regulatory support with creative approaches in the marketplace has the promise to give consumers more control their data and to allow them to participate more equitably.

8 views0 comments