Should electronic identities be managed by the state?

Competition among sub-contractors can be beneficial

Question: Should electronic identities be managed by the state?
Position‹2 of 2: No, electronic identities should not be managed by the state
Argument1 of 2›: Competition among sub-contractors can be beneficial

Using a free-market approach might be in citzen's interest

The argument

Sub-contracting to private companies might result in cost-savings and benefit to citizens from marketing competition: - The state can define quality requirements and appoint one or more distributors - Citizens can select between several providers on the basis of costs and services provided

Context

A state can auction or license the services of providing electronic ID to private companies instead of doing on its own.

Premises

[P1]Private sub-contractors competing in a market tend to lower costs and improve services for consumers. [P2] The state can set quality requirements and authorize multiple providers, allowing citizens to choose among them on price and service. [C] Therefore, electronic identities should not be managed by the state but delivered through competing private providers.

Counter-arguments

The risks behind a free-market approach are several. As an example: - The private companies in order to offer competitive prices might lower the quality thus comprising also privacy and exposing customer to threats. - A cartel can emerge thus depriving citizens of a real choice.

Rejecting the premises

[Rejecting P1] Competition produces those results in markets where buyers can observe quality and switch cheaply. Neither condition holds for identity credentials: a citizen cannot inspect a provider's security practices, a failure becomes visible only after a breach, and price pressure therefore bears on the attribute nobody can see — a provider competing on cost has a direct incentive to reduce exactly the safeguards buyers cannot evaluate. [Rejecting P2] Defining quality requirements and authorising distributors is itself state management; the premise concedes the state's role while relocating it to regulation, where enforcement is harder and slower than direct provision. It also assumes durable choice. Identity infrastructure has strong economies of scale and high switching costs, conditions under which markets tend toward a small number of providers or an effective cartel, leaving citizens choosing among few options over a credential they cannot decline to hold.