The Penn Wharton Public Policy Institute of the University of Pennsylvania recently published a comprehensive report on the U.S. election technology industry.
‘The Business of Voting’ closely analyzes the market trends, competitors, competiveness, among other interesting topics, and sheds light on how to proceed with the pending modernization of the U.S. election infrastructure. An introductory video to the study can be watched by clicking here.
The report describes the U.S. election technology industry as unattractive and argues that a more competitive industry could lead to better election systems. To explain why the industry is not welcoming to innovation and new competitors, researches cite five key points. These are:
Costly regulatory environment. “The transactions between customers and vendors are shaped by Federal and State guidelines”. 37 states and DC use some aspects of the federal testing and certification program designed by the Elections Advisory Commission. The remaining states use their own standards.
The cost for vendors to get a certification in one state can run over 1 or 2 million, and this is only to enter the competition in that single state. Another state may require additional costs. As in any other industry, “certification processes raise barriers of entry for competitors and favor incumbents”.
Constrained market size. The market is approximately $300MM. “Absent a major change in either technology or funding, growth in the industry is constrained by the growth in the base of registered voters. In addition, since voting systems can last for 10 or more years, competition is focused around the limited number of events where systems are being replaced.”
Highly fragmented customer base. The US is unique in that individual States and even counties have relative independence to decide the type of system they implement.
This fragmentation of the customer base increases the amount of accounts a vendor has to win to stay afloat. The smaller size of the fragmented accounts, in addition to the certification processes needed, and the substantial investments in direct marketing, lobbying and other political activity, further deter profit margins.
Cost-conscious customers. Most jurisdictions depend on substantial infusion of external funds to be able to update their election infrastructure. “Despite how essential this machinery is to the democratic process, there is currently insufficient political appetite for federal legislators to pass a bill similar to HAVA in the near future to support the purchase of new systems”. HAVA funds from 2000’s is basically gone.
Concentrated and entrenched vendors. Three vendors control 92% of the market.
The Wharton report is consistent with the findings of the Brennan Center for Justice, which said that during the 2016 election, 43 states used electronic voting machines at least 10 years old. Voters have noted that the U.S. election infrastructure is out of date. A research conducted by Smartmatic directly following the election showed that one in five Americans who voted in the presidential contest did not fully trust that the national election results were accurately tabulated; and one in three had concerns about the accuracy of the voting technology used at their polling place.
The ‘Business of Voting’ is a must read for those interested in understanding the current state of elections in the U.S.
