re: FTE-based pricing and usage-based pricing

[Heather Morrison <heatherm@eln.bc.ca>]

Every pricing model has its advantages and disadvantages.

Usage based pricing has its place, but could have some serious, 
harmful consequences if it became widespread in calculating 
pricing for electronic resources.

As Andrew Odlyzkow said (referring to internet use pricing, not 
e- resources):  usage-based pricing can be very effective.  The 
trouble is, you might not like the effects.

There are two very serious potential harmful consequences with a 
widespread shift to usage-based pricing:

Usage-based pricing will inevitably discourage use.  Think about 
library fees for ILL, or for photocopies.  Why did we implement 
these?  To limit use, because we cannot afford to provide these 
services on an unlimited basis.

Let's apply that concept to browser or reading.  If we apply 
usage- based pricing, unlimited reading for an undergraduate 
assignment suddenly can become something we cannot afford. 
Eliminating undergrad research assignments, or information 
literacy assignments, will be viewed by some as a potential 
cost-cutting measure.

Usage-based pricing could harm very important research areas with 
smaller research communities - for example, research on 
endangered species, rare diseases, or essential but esoteric 
basic research.

Another reason to think carefully about usage-based pricing:  of 
course, we want to pay less for what we use less.  However, do we 
want to pay more for what we use more?  This is a very likely 
consequence of usage-based pricing.

I believe there are very important reasons for pausing to give 
thought before we consider making use of usage statistics for 
pricing / purchasing / cancellation decisions, which are outlined 
in my book chapter, "The implications of usage statistics as an 
economic factor in scholarly communications", in "Usage 
Statistics of E- Serials" by David Fowler (editor). Published by 
the Haworth Press [2005]. Part of the "Haworth Series on Serials 
Librarianship and Continuing Resources", available in the SFU 
D-Space at: <http://ir.lib.sfu.ca/handle/1892/1639> Or, in E-LIS 
at: <http://eprints.rclis.org/archive/00004889/>.

If you're going to Charleston, please join Helen Clarke, Melanie 
Schaffner, Don Taylor, and myself for "The Value of Use" on the 
Thursday afternoon, or join us at the Saturday morning Beastly 
Breakfast on this topic.

As for FTE based pricing, this is one of the fairer methods of 
assessing pricing, particularly when the per-FTE rate is low. 
However, if often does not work for larger institutions where 
per-FTE pricing can become ludicrous.  With per-FTE pricing, it 
is not unusual for the smallest institutions to enjoy unlimited 
access, while the larger ones resort to a single simultaneous 
user for the same product.  It is better to consider FTE pricing 
as one element in a pricing model, for example to determine 
tiered pricing, or combine FTE pricing with a price cap for 
larger institutions.

Open access, in addition to being the optimum for access and 
research dissemination, in my view, offers the simplest and 
fairest possible economic models for e-resources.

As one example, consider a library shift from a purchase to a 
production model, with a focus on local production (e.g., support 
locally produced journals, fund or partially fund open access 
processing fees).  Here are some suggestions on what this might 
mean for different libraries:

A small college likely has a modest research output - their costs 
are low.

A research-intensive university in a developing country has 
relatively high needs for publishing; but, if this is based on 
local production, costs will be low (and good local jobs are 
generated).

If disaster hits (whether natural or financial) and your 
university's research output drops - so do your e-resources 
costs, directly and proportionately, while your access is 100%, 
as soon as your internet connections are back up.

This model is trickiest for the large, research-intensive 
university in a wealthy country.  Even here, however, the costs 
could easily be less than at present, with a little efficiency 
built in (e.g., support local journals using free, open source 
software, cap subsidies for processing fees), and/or some 
contribution to processing fee costs from funding agencies.

For more about this model, please see my blogpost, "An Open 
Access Model with Potential to Facilitate Global Economic 
Stability and Equity", at: 
<http://poeticeconomics.blogspot.com/2005/08/open-access-model-with-potential-to.html>

Heather Morrison
http://poeticeconomics.blogspot.com