Open Standards and the FDTA

Author: Dean Ritz, Senior Fellow, Data Foundation

Introduction

Standards play a crucial role in ensuring efficient and accurate interoperability of parts, of data, of communication, or language, of whatever the standards express. We have standards for electrical outlets, for the weight of a pound, for specifying the size of automobile tires, for making or affirming requests (e.g., “please” and “thank you”).¹ So important are standards that we coordinate their governance through international non-governmental standard bodies such as the International Standards Organization (ISO) and governmental ones including the National Institute of Standards and Technology (NIST) in the United States.

But not all standards are created equally. Some are proprietary and require payment on a per-use basis, and others are available under open license. 

A Tale of Two Standards

Let’s compare two ubiquitous standards for connecting devices: USB-C standard, and the Lightning(™) standard.  

USB-C was developed and is maintained by the USB Implementers Forum (USB-IF), a consortium of tech companies; USB-C is an open standard used by a wide range of manufacturers across various devices and brands. It is designed to be a universal standard, supporting a broad ecosystem of devices.

Lightning was developed and is owned by Apple Inc. Introduced in 2012, it is a proprietary standard, meaning only Apple and licensees can produce compatible accessories and connections for devices.

USB-C has been widely adopted across the technology industry, with many major electronics manufacturers using it for smartphones, laptops, tablets, Bluetooth earphones, and other devices. Its universal nature has made USB-C a popular choice for new devices.

In contrast, Lightning is used exclusively on Apple devices and certain accessories. Its adoption and use is limited to the Apple ecosystem.

As an open standard, USB-C does not generate significant licensing fees. Companies can implement USB-C without paying per-use royalties, but must pay fees if they wish to become members of the USB-IF or to certify their products. The result is widespread adoption and use, leaving room for innovation across devices and companies for optimum customer experiences.²

While Apple’s ecosystem-specific products and connectors facilitate efficiencies within the  product ecosystem with the stated intent to maximize customer satisfaction, it’s also a way for the company to drive reliance on Apple specifications and increase revenue. Third-party manufacturers who want to produce Lightning-compatible accessories must pay for a license and adhere to Apple’s certification standards. Unlike the USB-C standard, the “Made for iPhone” [link: https://mfi.apple.com/] license fees are levied in a manner that reflects the perceived business value delivered (e.g., per unit, as a percentage of revenue for certified devices, etc.).

In October 2022, the European Parliament passed legislation requiring all small and medium-sized electronic devices, including smartphones, tablets, cameras, and headphones, to use a common charging port by the end of 2024 – the USB-C; laptop connections will need to comply by 2026. The EU estimated that this standardization could save consumers up to €250 million annually and reduce e-waste by thousands of tons each year.

The law is part of broader efforts in the European Union to reduce electronic waste and make life easier for consumers by allowing them to use a single charger for multiple devices. 

Governments sometimes play a role in promulgating standards for public benefit not because governments should ‘pick a winner,’ but rather because governments may have responsibilities to protect consumers, protect the natural environment, promote efficient use of resources, and deliver on mission with an obligation to serve the American public.

Government standards are common. For example, in the United States, automobiles must meet certain safety standards and have certain features (e.g., brake lights and seat belts) to be sold in the U.S., or permitted on public roads.

Open License and the FDTA

The August 8, 2024 webinar hosted by the Data Foundation coincided with the Foundation’s publication of a Comment Playbook: FDTA Proposed Joint Rule. Included in this Playbook is a summary explanation of the term “open license”:

“open license,” which in existing law (per 44 U.S.C. § 3502(21)) means “a legal guarantee that a data asset is made available - at no cost to the public; and with no restrictions on copying, publishing, distributing, transmitting, citing, or adapting such asset.”

The “at no cost to the public” does not mean “at no cost to the regulated entity” to acquire the identifier. It means that the use of the identifier incurs no additional costs or restrictions in making use of the identifier.

Examples from the FDTA Draft Joint Rule

The FDTA draft joint rule from federal financial regulators proposes establishing several data standards that comply with this definition including the ISO 8601 [https://www.iso.org/iso-8601-date-and-time-format.html] for expressing a time and date data,  the Financial Instrument Identifier (FIGI) [https://www.omg.org/figi/], and ISO 17442-1:2020 for the legal entity identifier (LEI).

Some proposed data standards may initially seem incongruent because of the existence of some costs for making use of these standards, however, the standards still meet the definitions. For example ISO charges for access to the detailed ISO 8601 documentation (approximately $200), but it has no cost or restriction “on copying, publishing, distributing, transmitting, citing, or adapting such assets.” This expense is something a solution provider would incur, but data users would have no need for such detailed documentation (since it would be managed by the software), and the sufficient information on the syntax is readily available without charge on the Internet.

The LEI, as implemented by the Global Legal Entity Identifier Foundation (GLEIF) does have a small fee for issuance of an LEI. GLIEF authorizes companies to become issuers, based on a cost recovery model. An entity that wants an LEI can expect to pay between $60 and $200 for the initial registration of an LEI, and then a renewal fee typically in the range of $50 to $150 per year. A portion of the fee goes to GLEIF to support the global LEI system. It still complies with the definition of open license because the LEI data is publicly available at no cost, and GLEIF provides access to the LEI database for free through its website and APIs. You can download LEI data or access it via the GLEIF API without paying a fee to GLEIF.

Similarly, the FIGI “is provided free of charge to all, and for the public trust and benefit. There is no cost recovery, licensing or re-use restrictions or hidden fees for access, use, or redistribution of the FIGI symbology.” [https://www.openfigi.com/about/symbology] Even the FIGI and OpenFIGI trademarks may be used without a licensing fee. [https://www.openfigi.com/docs/terms-of-service]  

Conclusion

It’s obvious that FSOC agencies are working through a digital transition from documents to structured data. It will take time to do so. The FDTA prioritizes data interoperability across its member agencies.  Data standards are a requirement for both. The FDTA rightly requires that these standards be nonproprietary or available under an open license, and that data be available through an API and in bulk downloads without incurring licensing fees for the data. The draft joint rule is headed in the right direction.

1. In this example of “please” and “thank you,” a norm can easily develop into a standard way of communicating. Such can be the case with data standards. Use or “norms” can transition into standards. However, standards can precipitate to norms.

2. See “USB-IF Press Releases” <https://www.usb.org/pressroom/usb-press-releases?page=1>.