Long-term U.S. Productivity Growth and Mobile Broadband: The Road Ahead

By / 3.10.2016

The next generation of wireless is on the horizon.1 While the standards for 5G are not yet finalized, it’s clear that when 5G does arrive, it will mean faster streaming video, lower latency, and higher capacity. Companies such as AT&T, Verizon, T-Mobile, Ericsson and Nokia are in test mode, with widespread consumer rollout of 5G expected by 2020, or perhaps earlier.

At the same time, the attention of the mobile providers is focused on the spectrum auctions scheduled to start later in 2016. These auctions could make a significant contribution to freeing up spectrum for mobile data, and perhaps help reduce the short-term spectrum deficit.2 Meanwhile, the Federal Communications Commission (FCC) has started exploring the use of “millimeter wave” frequencies (mmW) for mobile services, a move that could potentially open up much more spectrum in the medium- and long-run.3

But nothing is assured. In the short-term, network engineers and others are already indicating that the upcoming auctions are not going to be a complete answer to forestalling capacity crunches in the years ahead. In the medium and long-term, mmW could be the next great swath of spectrum beachfront but the promise of that technology is in its early stages. Policy actions, especially around the availability of spectrum and around business models, can have long lag times. Understanding the broad contours of the long-term relationship between wireless and economic growth may help influence today’s policy decisions.

This paper focuses on 2030 and the potential of future wireless networks to support economic growth in the United States.4 We consider the economic implications of next generation wireless networks for long-term productivity growth and living standards, and relate those to current public policy questions. The result could be an acceleration of productivity growth in the physical industries that adds roughly $2.7 trillion (in 2015 dollars) to U.S. GDP by 2030. This translates into an 11 percent increase in economic output, which is equivalent to boosting the average annual growth rate by 0.7 percentage points.

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