Category: Uncategorized

WSJ: Why Entrenching Net Neutrality Carries Risks

Posted on by The Progressive Policy Institute

PPI Senior Fellow Hal Singer was cited by The Wall Street Journal today in an article arguing that the Internet marketplace has so far kept “paid prioritization” of Internet traffic at bay without the heavy hand of regulators:

When regional Bell companies were forced to “unbundle” and lease their infrastructure to competitors at cost, it dampened investment in that infrastructure, Mr. Singer and Robert Litan, an economist at the Brookings Institution, argue in a report for the PPI. Not until the unbundling requirement ended early in the 2000s did cable and fiber investment take off, they say.

Read the piece in its entirety at The Wall Street Journal.

WSJ: Best Web Regulator Not Necessarily Net Neutrality

Posted on by The Progressive Policy Institute

PPI Senior Fellow Hal Singer was quoted in the Wall Street Journal in a piece examining the adverse consequences of reclassifying the Internet as a public utility under Title II:

“Somebody has to pay for the infrastructure,” said Hal Singer, a consultant and scholar at the Progressive Policy Institute. If ISPs can’t charge content providers, they’ll charge consumers, who generally are more price-sensitive, and the result will be less usage.

Read the piece in its entirety on The Wall Street Journal. 

NYT: Internet Taxes, Another Window Into the Net Neutrality Debate

Posted on by The Progressive Policy Institute

PPI Senior Fellow Hal Singer was quoted by the New York Times in a piece on how reclassifying the Internet as a public utility may hurt the wallet of consumers:

The Internet Tax Freedom Forever Act, according to Hal Singer, an economist and senior fellow at the Progressive Policy Institute, “limits the damage” from Title II regulation and its tax implications. Mr. Singer is the co-author, with Robert Litan, an economist and nonresident senior fellow at the Brookings Institution, of a recent study that estimated the potential cost to consumers of Title II regulation of Internet service. (The Progressive Policy Institute’s supporters include the National Cable and Telecommunications Association, which opposes Title II regulation. A spokesman for the institute, Cody Tucker, would not identify its financial backers, but he said that the research organization receives more funding from foundations, individuals and corporations that support Title II classification for broadband Internet service than oppose it.)

The potential pitfall, Mr. Singer said, is that the Internet tax freedom law mainly bans “general sales taxes,” but there is still room for states and municipalities to assess fees that are related to the “obligations of a telecommunications provider.” In their study, the two economists assembled a database of the taxes and fees states place on phone bills, and then assumed those charges would be levied proportionately on Internet broadband service.

Read the piece in its entirety on The New York Times.

PRESS RELEASE: New Survey Finds Americans Skeptical that FCC Regulation of the Internet Will Be Helpful; Favor More Disclosure

Posted on by The Progressive Policy Institute

For Immediate Release

WASHINGTON—The Progressive Policy Institute (PPI) today released the results of a new survey finding that most Americans are unfamiliar with the term “net neutrality,” want greater disclosure of the details of the FCC’s proposal to regulate the Internet, and think that the government regulating the Internet like a public utility will not be helpful.

The nationwide survey, by Hart Research Associates, was conducted from February 13 to 15, 2015 on behalf of PPI. The survey was conducted by telephone (both landline and cell phone) among a cross section of 800 adults age 18 and over. It found:

  • Nearly three out of four (74%) Americans are unfamiliar with the term “net neutrality” and what it refers to.
  • 73% of Americans want greater disclosure of the details of the FCC’s proposal to regulate the Internet.
  • Nearly eight in ten (79%) Americans favor public disclosure of the exact wording and details of the FCC’s proposal to regulate the Internet before the FCC votes on it.
  • Only one in three Americans thinks that regulating the Internet like telephone service will be helpful.

“The public neither understands nor supports the FCC voting on net neutrality rules without greater disclosure of the exact wording and the details of the proposal,” said Peter Hart, Founder of Hart Research Associates. “Net neutrality is near net zero understanding: just one in four Americans knows what the term refers to, and just one in 10 Americans has positive feelings about it. In addition, a majority of Americans think ‘the government should not take a stronger and more active role in overseeing and regulating the Internet.’”

“These findings suggest that the FCC’s bid to impose outdated telephone regulations on the Internet is driven more by professional activists than by the public, which seems instinctively to resist the idea,” said Will Marshall, PPI President. “That’s why Congress should take a closer look at what the FCC is up to and make sure these issues get a thorough public airing.”

The survey’s margin of error is ±3.46 percentage points for 800 adults at the 95% confidence level.  Sample tolerances for subgroups are larger. This is the first of several public opinion surveys PPI plans to release on issues related to regulation of the Internet and telecommunications law.

Download “2015.02_Survey_FCC-Approach-to-Net-Neutrality.pdf/”

Survey Questionnaire

For more information, please contact Cody Tucker or Steven Chlapecka at 202.525.3926.

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The Hill: Ukraine crisis tests the West

Posted on by The Progressive Policy Institute

Thanks to determined diplomacy by Germany and France, Russia agreed Wednesday to a new cease-fire in Ukraine, to begin Sunday. But German Chancellor Angela Merkel was anything but triumphant, calling the deal a mere “glimmer of hope” for peace.

Merkel has good reasons for curbing her enthusiasm. The previous cease-fire agreement reached last September didn’t hold for long. And Russian strongman Vladimir Putin still holds the high cards in any peace negotiation with Ukraine and the West.

Under the new truce, both pro-Russian separatists and Ukrainian forces are to pull back heavy weapons from the front. But the deal still leaves separatists in control of a big chunk of territory in eastern Ukraine. If the cease-fire is violated and fighting resumes, Ukraine will again find itself in an unequal fight with rebels amply supplied with Russian weapons and, Kiev says, regular Russian troops.

Continue reading at The Hill.

Wall Street Journal: A Disconnect on Municipal Broadband

Posted on by The Progressive Policy Institute

Should city governments get into the Internet service business, competing with the likes of Verizon, AT&T and Comcast for the right to pipe the Web into your living room or office? President Obama thinks so. He visited Cedar Falls, Iowa, on Jan. 14 to laud the city’s publicly owned utility, which offers residents fiber-optic Internet. He urged other municipalities to follow its example.

“Today, tens of millions of Americans have only one choice for that next-generation broadband, so they’re pretty much at the whim of whatever Internet provider is around,” Mr. Obama said. “And what happens when there’s no competition? You’re stuck on hold. You’re watching the loading icon spin. You’re waiting, and waiting, and waiting. And meanwhile, you’re wondering why your rates keep on getting jacked up when the service doesn’t seem to improve.”

Government-owned networks, the White House claims, can bring healthy competition to Internet service, increasing speeds and lowering prices. Mr. Obama even included a line about this in his recent State of the Union address, saying he intended to “help folks build the fastest networks.” Unfortunately for the president, his premise—that our current broadband is slow, costly and inaccessible to many Americans—simply does not check out.

Internet speeds in the U.S. are among the fastest in the world. More than 90% of American households are now served by connections capable of neck-snapping speeds of 100 megabits per second. (Streaming a movie from Netflix on the “ultra high-definition” setting requires a connection of only 25 megabits per second.) Many consumers choose to pay lower fees for slower service. Still, if individual U.S. states were ranked by average broadband speed alongside countries from across the globe, we would hold 12 of the top 20 spots.

Continue reading at The Wall Street Journal.

Forbes: The Truth Behind The FCC’s “Fact Sheet”

Posted on by The Progressive Policy Institute

Earlier this week, the FCC gave us a sneak preview of what’s in store for its upcoming order on net neutrality. The ironically named “Fact Sheet” is anything but—it is filled with half-truths and internal contradictions.

At the urging of protestors and “public-interest” groups, the FCC has arrived at a fairly radical prescription—regulating Internet service providers (“ISPs”) as public utilities—and is now looking for ways to justify its approach. The problem with this politically driven result is that it exposes the FCC’s pending order to significant litigation risks, and it undermines the agency’s long-standing credibility as a dispassionate expert agency in the eyes of Congress.

The biggest whopper of the “Fact Sheet” is the claim that the FCC will forbear from rate regulation: “the Order makes clear that broadband providers shall not be subject to tariffs or other form of rate approval, unbundling, or other forms of utility regulation.” (emphasis in original). Really? By choosing to ban paid priority while permitting unpaid priority for “reasonable network management,” the FCC has effectively imposed rate regulation: a zero access price for priority arrangements within an ISP’s network.

In a further nod to rate regulation, the FCC previews that the order “will apply” sections 201 and 202 of the Title II, which will permit edge providers such as Netflix to complain that an ISP’s access rates for interconnection are “unjust and unreasonable.” The result of any such complaint process, assuming the edge provider prevails, would be a regulated access rate. And yet the FCC would have the public believe that its so-called “light-touch” Title II approach—an oxymoron if there ever was one—is free from rate regulation.

The entire purpose of embracing Title II was to permit edge providers to achieve near-zero access fees for interconnection. Under the now jettisoned “commercially reasonable” approach from section 706, which the FCC’s May 2014 notice of proposed rulemaking seemed inclined to adopt, Netflix would have little assurance of getting its access fees down to zero. Any such concerns have now been allayed. This is the very essence of rate regulation.

The “Fact Sheet” is also dishonest when it comes to the likely taxes that broadband customers will face as a result of reclassifying Internet service as a telecom service. It claims that the “Order will not impose, suggest or authorize any new taxes or fees – there will be no automatic Universal Service fees applied and the congressional moratorium on Internet taxation applies to broadband.” (emphasis in original)

The mere inclusion of broadband revenues in the rate base for federal universal service—also promised by the “Fact Sheet” as a way to “bolster universal service fund support”—will generate about $500 million in new federal fees for residential consumers. This stealth tax arises because voice revenues, which form the current rate base for universal service, are disproportionately paid by businesses. Even without an increase in program demand, the formulas used to generate federal universal service fees will automatically shift the burden at the margin away from businesses and onto consumers.

Moreover, states and localities don’t need the FCC to “suggest or authorize” any new taxes to include broadband revenues in their own rate base. Existing state and local fees that apply to the “obligations of a telecommunications carrier” could easily be extended to Internet service after reclassification.

Indeed, Vermont’s telecom director admitted this week that he is already counting on the new source of funding: “One of the things that would come along with [reclassification] is the ability to assess a universal service fee on broadband services. If that happens, the money might be there to fund these higher speeds.” To the extent that states and localities tax Internet service to the same degree as they currently tax telecom service, broadband consumers would be hit with billions in new fees.

The FCC’s promise to forbear from the scariest parts of Title II is mere window dressing. The current chairman cannot make commitments on behalf of future commissioners. So if a new chair decided to make a run at mandatory unbundling, for example, the door has now been left wide open. Given Mr. Wheeler’s sharp ideological reversal relative to his statement that accompanied the FCC’s Notice in May 2014—when he vowed to bifurcate interconnection from net neutrality—there is little reason to believe that Mr. Wheeler himself won’t change his mind on forbearance in a few months.

The “Fact Sheet” lays out a blueprint for heavy-handed regulation that is certain to meet fierce litigation, and likely to meet a swift reversal by the courts on both substantive and procedural grounds. Banning paid priority, even under Title II, is highly unorthodox. While the D.C. Circuit suggested that case-by-case treatment of paid priority under Title II with the same “guilty-until-proven-innocent” presumption from the 2010 Order might be kosher, a blanket prohibition is a different animal.

And reclassifying carriers without a finding of market power seems very sketchy. Does the FCC really think that Sprint can raise wireless prices above competitive levels or exclude rivals?

Setting aside the substance, the FCC’s rush to beat Congress to a legislative solution to net neutrality has caused the agency to take short cuts, which will also be frowned upon by the courts. Neither forbearance nor interconnection has been properly briefed. Accordingly, ISPs and tech startups are complaining about potential violations of the Administrative Procedure Act.

The FCC should level with Americans on the merits and demerits of Title II. It is a highly risky maneuver that necessarily entails rate regulation and a dose of new taxes. The “Fact Sheet” sugarcoats the truth.

This piece is cross-posted from Forbes.

Ignore Today’s Jobs Report: Read the MGI Debt Report Instead

Posted on by The Progressive Policy Institute

Ignore the January jobs report. Yes, the US economy has added 1 million jobs in the past three months, and that’s great news for everyone. [ed. added Friday morning] But really, just forget it. If you really want to know what’s going on in the global economy and what’s at stake in the 2016 election,  read McKinsey Global Institute’s latest report “Debt and (not much) deleveraging.”  And while you are at it, read two other groundbreaking MGI reports, “Disruptive technologies: Advances that will transform life, business, and the global economy” and Global flows in a digital age.

Together the three MGI reports tell a persuasive story that the global status quo going to break sometime soon–the only question is in what direction.  On the one hand, global debt has grown by $57 trillion, as the first report shows, which “poses new risks to financial stability and may undermine global economic growth.”

This massive global borrowing is only justified if global growth accelerates enough to pay down the debt. That sort of global boom will require the   disruptive technologies that MGI so ably describes in the other reports.

So here’s what we can expect around the corner–either a global financial crisis bigger than the last one, or an explosion of disruptive technologies that will transform our world. Or as a friend said, somewhat sarcastically, “Great! I can’t wait!”

And that’s why the 2016 election in the U.S., and comparable elections around the world, are so important. The next stage of the global economy is going to be fraught with surprises, both good and bad. We need political leaders with the skills to negotiate a complicated and unexplored economic and technological landscape.

[Headline modified on 2/6/15]

[Text added  on 2/7/15]

 

CNN: The problem with Obama’s budget

Posted on by The Progressive Policy Institute

The $4 trillion budget President Barack Obama sent Congress on Monday is his blueprint for reviving “middle class opportunity.” Liberals are thrilled by the redistributive thrust of the president’s budget — it would hit affluent Americans with a battery of new tax hikes, totaling $2 trillion over the next decade, and use the proceeds to finance substantial tax cuts for low and middle income families.

However, this has, of course, scandalized tax-averse congressional Republicans, who echo House Ways and Means Chairman Paul Ryan in denouncing the Obama budget as an exercise in “envy economics.”

Given the partisan stalemate in Washington, many pundits therefore view the White House budget as a purely political statement intended to frame the 2016 presidential debate. Next, the GOP Congress will produce a conservative alternative, and each side will spend the next two years accusing the other of waging class warfare.

Except that the federal government actually does need a budget, especially one that reinforces the economy’s gathering momentum. The one thing both parties seem to agree on is that reversing middle class stagnation is the nation’s top priority. What America needs more than anything else is a long stretch of robust economic growth, something we have not seen since the 1990s, when both the growth and unemployment rates averaged about 4 percent a year.

Continue reading at CNN.

The Hill: The Keystone distraction

Posted on by The Progressive Policy Institute

The Senate will vote soon on what the GOP has made their top legislative priority: expedited approval of the Keystone XL pipeline. Given the realities of today’s crude oil market, the political wrangling over Keystone has a decidedly retro feel.

The United States has experienced an energy revolution since the Keystone XL pipeline was first proposed seven years ago. Most important is America’s shale oil and gas boom, which has contributed to a sharp drop in global oil prices. With U.S. oil production in particular surging, why do Republicans persist in claiming that Keystone is a matter of such urgent national interest?

The answer clearly has more to do with politics than with the new realities of U.S. energy abundance.

The energy sector has become an important driver of U.S. investment during our painfully slow economic recovery. Investment is projected to total $890 billion over the next two decades. And all this investment is spawning good, middle-class jobs for Americans. Unfortunately, inadequate infrastructure constrains our ability to take full advantage of such investment and job growth.

Continue reading at The Hill.

Why GDP and productivity growth may be underestimated

Posted on by The Progressive Policy Institute

On Friday, the very fine economists at the Bureau of Economic Analysis will release their estimate of fourth quarter GDP growth.  Current estimates peg the US economy’s growth at roughly 3% for the quarter.

But here’s the rub:  The rise of the data-driven economy means government economic statistics may significantly understate US GDP growth and productivity growth. Official numbers are afflicted by huge and growing blind spots that increasingly distort the published figures.  To summarize, we are building a mammoth data-driven economy that, perversely, is only partly visible in the economic data.

To give just one simple example:  As of January 29, the official statistics report that the real value of of Internet access consumed by households has fallen by 5% over the past year.   The official statistics also report that real value of cable and satellite television and radio services has fallen by 2% over the same stretch.  And supposedly the real consumer value to households, as measured by the government, of mobile, cable, and internet access together has risen by a measly 0.4% over the past year.

These numbers can’t be right (for more of the theory here, see PPI’s 2012 paper “Beyond Goods and Services:The (Unmeasured) Rise of the Data-Driven Economy” )

Or to give another example, private investment in big data.  All sorts of organization are building up huge data stores with long-term value.  For example, the shift to electronic health records is predicated on the value of that data for lowering health care costs and improving patient treatments. (see, for example https://www.healthit.gov/providers-professionals/benefits-electronic-health-records-ehrs).

In theory, the investment in big data should be reported as part of GDP. Indeed, the BEA has recently started reporting spending on R&D and “entertainment, literary, and artistic originals” as part of investment spending.  And the original researchers on intangible investment did in fact include investment in databases.

However, in practice, the BEA does not include investment in big data in GDP: The tech equipment and the programming, yes, but  not the actual labor and costs necessary to collect and clean the data. For example, when a hospital employs medical coders to clean up their electronic patient records, that coder’s salary is recorded as an expense, but not as a contribution to GDP.  Similarly, the costs of converting from paper to electronic records is not being counted a part of GDP.

The distortion in the statistics from omitting big data is becoming bigger as big data becomes more important.  I cite health care because health care organizations are devoting vast resources to electronic health records, but the same holds for any company collecting big data.

We can list example after example where the data-driven economy is simply missed by the current statistics.  An earlier PPI paper,   Data, Trade and Growth, showed that the government does a terrible job measuring cross-border data flows, because many of them do not leave a monetary footprint. to the extent that the US holds a commanding position in cross-border data trade, this omission may be important for GDP and productivity growth.

Finally, it’s worth noting that reshoring may be artificially depressing the growth and productivity statistics, just as offshoring artificially inflated growth and productivity gains in the early part of the 2000s (this give me a chance to plug a new conference volume edited by myself and Susan Houseman, entitled “Measuring Globalization: Better Trade Statistics for Better Policy“). I will address this point at length in a future post.

 

 

 

 

 

 

 

Press Release: Osborne to Lead PPI Project on Reinventing America’s Schools

Posted on by The Progressive Policy Institute

For Immediate Release
January 21, 2015

OSBORNE TO LEAD PPI PROJECT ON REINVENTING AMERICA’S SCHOOLS

WASHINGTON, D.C.—David Osborne, co-author of Reinventing Government and other highly regarded books on public sector reform, will direct a new Progressive Policy Institute (PPI) Project on Reinventing America’s Schools. The project will examine K-12 innovation, with a special focus on the emergence of new governance arrangements that allow for more school and teacher autonomy, tailored instruction to diverse student needs, and greater accountability to the public.

“As one of America’s leading experts on public innovation, David is uniquely suited to lead our work on public school reinvention,” said PPI President Will Marshall. “As our political leaders turn their attention to reducing economic inequality, it’s hard to imagine a more urgent priority than closing the achievement gaps in our K-12 system.”

“I am delighted to be working again with PPI, which played a pioneering role in the public school choice and charter school movements,” said Osborne. “We believe that creating a public education system of charter and charter-like schools is the key that will unlock the door to dramatic improvement, as it already has in cities such as New Orleans, Washington, D.C. and Denver. Our hope is that this research will speed the transformation of school districts throughout the country.”

In an op-ed for last Sunday’s Washington Post, Osborne argued that giving teachers more control would improve school performance and help retain quality teachers in the classroom.

Osborne is the author of the forthcoming book, Reinventing America’s Schools: Creating a 21st Century Education System, and the co-author of five books including: The Price of Government: Getting the Results We Need in an Age of Permanent Fiscal Crisis (2004), The Reinventor’s Fieldbook: Tools for Transforming Your Government (2000), Banishing Bureaucracy: The Five Strategies For Reinventing Government (1997), and Laboratories of Democracy (1988). He has also authored numerous articles for the Washington Post, the Atlantic, the New York Times Magazine, Harpers, The New Republic, Governing and other publications.

In 1993, Osborne served as a senior advisor to Vice President Gore, to help run what the Vice President often called his “reinventing government task force,” the National Performance Review. He was the chief author of the September 1993 NPR report, which laid out the Clinton Administration’s reinvention agenda, called by Time “the most readable federal document in memory.”

The Project on Reinventing America’s Schools is made possible by generous support from the Walton Family Foundation and The Eli and Edythe Broad Foundation.

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Washington Post: To improve schools, let teachers run them

Posted on by The Progressive Policy Institute

Walk through a typical public school, and you see students, sitting in rows of identical desks, listening to teachers talk. Unless the teacher is particularly inspiring, half of the students are zoning out. This isn’t just a problem for teachers, half of whom leave the profession within their first five years. It’s also a problem for their pupils: Disengaged teenagers do not make the best students.

Now imagine if students were instead encouraged to work on projects they chose: building robots, writing plays, researching why bees are dying off by the millions.

When teachers run their own schools, they often make such changes. “We’re competing against Xbox 360, and over-scheduled days with soccer practices and very dynamic lives,” says Kartal Jaquette, one of 10 teachers who run the Denver Green School. “Are you almost as interesting as a video game? Are you getting almost as much attention as a soccer coach might? Is it as much fun? Because if not, they’re going to tune you out.”

Teachers are in charge of at least 70 public schools in 15 states; most, but not all, are charter schools. Ten more teacher-run schools, including one in Maryland’s Prince George’s County, are in the planning stages. These schools are not only redesigning the learning process to better engage students, they’re improving student performance. On top of that, they’re stemming the high dropout rate among teachers.

Continue reading at the Washington Post.

The Hill: For free community college, completion is key

Posted on by The Progressive Policy Institute

President Obama’s proposal for free community college is an ambitious effort to address critical gaps in America’s post-secondary education and career training systems. However, it may fall flat before it even gets off the ground, and that’s not just because of its high price tag. It’s because community college success depends not on how many students enroll, but how many complete.

Under President Obama’s proposal, all Americans will have access to two years of free tuition at our nation’s public community colleges. The only requirements are to maintain at least C+ grades and to be making “steady progress” toward a degree. It calls for the federal government to cover three-quarters of the estimated $60 billion cost, with states covering the rest.

Certainly, increasing community college enrollment is a good start for boosting youth employment prospects. Young Americans without a post-secondary degree are not faring well in today’s workforce. My own research shows how they have been gradually pushed down and out of the labor market, in a phenomenon I call the “Great Squeeze.”

Continue reading at The Hill.

Pipeline Politics: The Keystone Distraction

Posted on by The Progressive Policy Institute

The decision by Senate and House Republicans to make approval of the Keystone XL Pipeline their first legislative priority has a decidedly retro feel. Much has changed since the Keystone project was first proposed in 2008. Most important is America’s shale oil and gas boom, which has contributed to a sharp drop in global oil prices. With U.S. oil production in particular surging, why do Republicans persist in claiming that Keystone is a matter of such urgent national interest?

The answer clearly has more to do with politics than with the new realities of U.S. energy abundance. Republicans see Keystone as a classic wedge issue that splits two important Democratic constituencies, labor and environmentalists. So much for claims by Senate Majority Leader Mitch McConnell and others that the GOP will use its new Congressional majority to govern responsibly and put problem-solving over partisanship.

That’s a shame, because the Keystone debate is a distraction from a bigger and more important issue: How to move America’s shale windfall to market. A good portion of U.S. production is happening in places like North Dakota, which is far outside America’s original “oil patch.” When Keystone was first proposed, about 60% of domestic production came from Alaska, Texas, and the Gulf of Mexico, where significant oil and gas infrastructure is located. However, with production now occurring in shale developments like North Dakota, surpluses are developing at storage and transportation hubs making it difficult to get to market.

Download “2015.01-Freeman_Pipeline-Politics_The-Keystone-Distraction.pdf/”

Politico: Barack Obama nears limit of executive powers

Posted on by The Progressive Policy Institute

PPI President Will Marshall was quoted by David Nather in Politico on President Obama’s upcoming State of the Union speech:

Will Marshall, president of the Progressive Policy Institute, said Obama can still “set the terms of the debate” through executive orders, but what’s at stake is broader than a few executive actions: “Nothing is more important to his legacy than making sure that economic growth works for everyone.”

Continue reading at Politico.