issue: Economy

The State of U.S. Broadband: Is It Competitive? Are We Falling Behind?

Posted on by The Progressive Policy Institute

Advocates for new regulation of the U.S. broadband Internet base their case on the related contentions that (i) our nation lags behind the rest of the world in quality, price, and deployment of broadband, and (ii) the market for U.S. broadband service is not competitive. This paper analyzes the latest U.S. and international data on speed, price, profits, and investment, and concludes that both of these contentions are false.

As to the first component of the advocates’ argument: the U.S. ranks 10th in the world in average broadband speed among nations surveyed by Akamai, and trails only South Korea and Japan among our major trading partners, countries with extraordinarily high urbanicity. We trail only Japan in the G-7 in both average peak connection speed and percentage of the population connection at 10 Mbps or higher. On price, the record is even more clear—the United States has the most affordable entry-level prices for fixed broadband in the OECD.

Other measures also belie the claim that U.S. broadband lags behind our international peers. Our per capita investment in telecom infrastructure is 50 percent higher that of the European Union, and as a share of GDP our broadband investment rate exceeds those of Japan, Canada, Italy, Germany, and France.

In short, when looking holistically at data on rankings, investment, prices, and affordability in their entirety, no evidence suggests that the United States is an underperforming dullard sitting in the back row of the broadband room. Our networks are faster, our prices more competitive, and our investments larger than mostof the world’s other major industrial nations.

The second pillar of the critics’ argument is also tenuous. U.S. broadband is provided in a dynamic, quickly changing market marked by dramatic shifts in products, services, and competitors, and breakneck innovation. In such a market, the best evidence that competition is working and producing good results is the high quality of service and affordability that we see in the United States today. Critics often claim that the purportedly “small number” of broadband providers is evidence that the U.S. market is uncompetitive, although the significant capital costs of creating these networks, while limiting the ultimate number of providers, also compels them to compete to rationalize their investments. And to the extent that a narrow focus on the number of competitors in the market has any relevance, it is noteworthy that 90 percent of Americans can choose between at least one wired and one wireless provider offering four Mbps broadband, and 88 percent of Americans can choose from at least two different wired services providers.

Moreover, the profit margins of U.S. broadband providers are generally one-sixth to one-eighth of those companies (such as Apple or Google) that use broadband, contradicting the idea of monopolistic price-gouging by providers.

The result of this competition is that 96 percent of U.S. households have access to speeds equal to or greater than 10 Mbps, and 99 percent of Americans can now access service of at least 3 Mbps. Over 50 percent have access to service at 100 Mbps or more. This perhaps is the best evidence that critics of U.S.broadband performance misrepresent the state of broadband in America today.

We should want U.S. broadband to be diffused rapidly, priced reasonably, and used to build social, political, and economic citizenship. The evidence presented here shows that the current approach to broadband regulation is serving these goals admirably. To go further, we will need government to develop policies and programs that achieve these goals in a way that supports the current regime of high investment and continuous innovation by competitive broadband providers, not in a way that would limit or upend it.

Download the complete report. 

Why progressives should hold their applause for student loan order

Posted on by The Progressive Policy Institute

President Obama issued an executive order yesterday to expand Pay As You Earn (PAYE), the administration’s flagship income-based student loan repayment program. The president’s action offers millions of workers welcome if modest relief from student debt burdens. But progressives should hold their applause, because it also has two downsides.

First, expanding PAYE boosts government public subsidies for a broken higher-education financing model. Second, it will reinforce the already strong bias in public policy toward college attendance at the expense of other post-secondary options for young Americans.

Unlike the standard student-loan repayment program, which has fixed repayment schedules, PAYE is an income-driven repayment program, meaning that how much you pay is based on how much you earn. Eligible borrowers repay up to 10 percent of their monthly income, with any remaining balance forgiven after 20 years. Its commendable goal is to make repayment easier for graduates who take important jobs that pay less — social workers, school teachers, workers in the nonprofit sector.

With the new order, PAYE eligibility will expand to an additional 5 million people who borrowed before the original October 2011 cutoff. It follows last year’s campaign to dramatically increase PAYE enrollment, during which the Department of Education contacted 3.5 million eligible borrowers with limited success. Legal questions surrounding the new order have already been raised regarding presidential authority, especially since the cost to the government remains unknown.

In expanding PAYE, Obama underscored his desire to assure affordable access to college. The idea that college is for everyone rests on the well-established fact that college graduates earn more money than high school graduates on average.

But as I’ve recently argued, while some form of post-secondary education is necessary, not everyone needs a bachelor’s degree. The point was even made recently by Secretary of Labor Thomas Perez.

The wage premium for college graduates is growing not because the degree is worth so much more, but because high school diplomas as worth so much less. In fact, real earnings for recent college graduates have been falling over the last decade, and underemployment remains at record highs. New research shows the number of college graduates taking white-collar jobs declined since 2000, and is now at 1990 levels. If wage growth for recent college graduates was in line with tuition increases, today’s conversation surrounding college affordability would look very different.

Moreover, the new tools of digital learning — such as online courses — should be driving education costs down, yet tuition continues to climb. That suggests the entire financing model for higher education needs reform. And because there are too few viable pathways into the workforce after high school, our $100 billion per year federal student aid system is channeling people into four-year colleges who may be better suited for less expensive options.

Expanding PAYE may relieve the financial strain on borrowers in the short term, but it will almost certainly exacerbate the burden on the federal student aid system in the long run. With PAYE, increased access and opportunity for students comes at the cost of accountability for educational institutions. Borrowers have less incentive to make smart borrowing decisions, or complete in a timely manner. And schools have less incentive to control costs.

When income-based repayment was first introduced in 1993, then called “pay-as-you-can,” it was to encourage “public service” jobs — those jobs earning a relatively modest income. But the idea was not for everyone to enroll in such a plan, only those who needed longer repayment terms to avoid default. Then, in a debate remarkably similar to today, President Clinton acknowledged that the longer terms under income-based repayment were not ideal for most borrowers, and in fact the standard 10-year repayment plan worked well for the majority.

Still, if PAYE expansion goes forward, there are ways to keep its costs in check. First, expand PAYE only to undergraduate loans. If the main intention is to promote college affordability, then it makes sense to focus on undergraduates. Graduate school borrowers, who tend to have higher levels of debt, could apply annually instead of being automatically eligible.

Second, schools should give borrowers the information they need to make an informed decision about which plan is the best for them, and have the Department of Education regularly report on program metrics. Finally, limit, if not eliminate, the provision for “public service” that forgives any remaining balance after 10 years. With the income-based benefits already provided by PAYE, this provision becomes a second subsidy for the same loan.

The president’s executive order could be interpreted as a way of compensating young college graduates for the slow-growth economy they graduated into. Yet while such compassion is admirable, the administration also needs to grapple with the root causes of soaring college costs, including the dearth of pathways into the workforce for young Americans who may not need a four-year bachelor’s degree.

This op-ed is originally appeared in The Hill, find their posting here.

The New York Times: Shifts in Wireless Market May Sway a Sprint Deal

Posted on by The Progressive Policy Institute

Edward Wyatt’s piece this morning, “Shifts in Wireless Market May Sway a Sprint Deal,” examines how the evolving mobile and wireless markets affect the prospects for a possible Sprint and T-Mobile merger.  PPI’s senior fellow Hal Singer is quoted commenting on how the lines separating once discrete markets seem to be fading, and whether this trend affects the deal’s chances:

If regulators continue to see the wireless and wireline business as discrete markets, they will continue to be skeptical,” said Hal J. Singer, a principal at Economists Incorporated and a senior fellow at the Progressive Policy Institute. “But if they can be convinced that the lines between wireless and wireline are beginning to blur,” there might be a chance for a merger to be approved, he said.

You can read the full article on The New York Times website, here.

Course Correction

Posted on by The Progressive Policy Institute

Community colleges should be matching students to jobs, not funneling everyone into a four-year degree. A response to Richard D. Kahlenberg.

The United States is facing one of the greatest workforce challenges in recent history. Wages have been stagnant for a decade and middle-skill jobs have evaporated—and yet unfilled vacancies for high-wage computer and tech jobs are at record levels. Few have been as badly affected by the shifting landscape of the labor market as young Americans, who must adapt to the global competition for jobs with no guarantee of a secure retirement. Already a wealth gap exists relative to older generations at their age, and lower net worth, alongside rising student debt, will inevitably leave lasting economic scars.

In his recent Democracy essay [“Community of Equals?,” Issue #32], Richard Kahlenberg correctly points out that the failure of our nation’s community colleges is partly to blame. He rightly emphasizes the important role community colleges play in the well-being of our nation’s workforce, writing, “Their success or failure will help determine whether America remains globally competitive and whether American society can once again promote social mobility in an era of rapidly changing demographics.”

So ineffective have community colleges become that they are hardly considered a viable pathway into the workforce. In fact, a four-year credential seems to be the only acceptable postsecondary pathway; you either earn a bachelor’s degree or accept a fate of underemployment and low pay. It follows that since 2000, the number of two-year colleges has remained flat while the number of four-year institutions has increased by more than 400, or 17 percent. There are now about 2,900 four-year colleges in the country, or roughly one four-year institution for every U.S. county.

Kahlenberg wisely advocates reforming the entire community college system. However, his analysis and proposed solutions are flawed in three important ways. First, community colleges are failing not because of de facto segregation, as Kahlenberg insists, but because they don’t adequately prepare students for the workforce. The best way to fix this is through private-sector engagement, not heavy-handed government intervention. Second, the goal of community colleges should be to prepare students for the workforce, not just to pave a path to a bachelor’s degree, as Kahlenberg suggests. Finally, failure within the postsecondary education system is not confined to two-year colleges. Four-year colleges are also facing serious challenges.

The first flaw in Kahlenberg’s analysis is his foregrounding of socioeconomic segregation as the main problem facing community colleges. He writes, “[O]ur higher education system, like the larger society, is increasingly divided between rich and poor, an arrangement that rarely works out well for low-income people.” He suggests that the demise of community colleges stems from a vicious cycle of reinforcing racial and low-income stratification, where only poor people go to community colleges while better-off people get an automatic pass to attend a four-year institution.

Kahlenberg offers the fact that four-year colleges enjoy greater government support as proof of inherent preferential treatment toward more affluent Americans. He laments that “direct federal aid to higher education disproportionately benefits four-year over two-year colleges” and that “wealthy four-year universities receive large public subsidies in the form of tax breaks that are largely hidden from public view.” Yet this is hardly proof of income or racial bias. Four-year colleges are more expensive, and provide a longer, more comprehensive service than community colleges, so it’s not surprising that more federal aid goes to four-year institutions. Moreover, if private nonprofit schools are able to use tax-supported donor funds to defray rising costs instead of increasing tuition or relying on students to take on more debt, then that should be applauded, not assailed.

By focusing on segregation, Kahlenberg misses the fact there are other factors at play. For example, our nation’s K-12 education system bears much of the blame for perpetuating the failure of community colleges. Too many young Americans graduate from high school without rudimentary skills, forcing community colleges to retrain students in basic education. For instance, the Northern Virginia community college system—an exemplary system by Kahlenberg’s definition because it grants automatic admission to Virginia state universities upon completion—offers a course in learning “whole numbers.” But I found no courses specifically in SAS, STATA, Eviews, or other statistical analysis software that high-wage employers are looking for. By being forced to offer mainly remedial courses, such community colleges disserve the many students who do have basic skills and prohibit the integration of people from different backgrounds that Kahlenberg strives to encourage.

In reality, our community colleges are failing for a reason more obvious than a socially ingrained elitism. It’s because they aren’t providing students with a positive return on investment. They are not adequately preparing their students for the workforce with dynamic training programs that align with local employer demands.

Indeed, the best way to promote economic and social mobility is to prepare our workforce for jobs that match such demands. The key is to engage the private sector: the employers. They must be an active partner to community colleges, participating in curriculum design and engaging with prospective hires. Nowhere in his essay does Kahlenberg mention the role of the private sector, leaving a rather large hole in his analysis.

Instead, the author’s proposed reform of reallocated government spending will only preserve the status quo. Worse, it would exacerbate the skills mismatch, as community college administrators would have little incentive to work with local employers. His focus on bringing in more middle-class students to community colleges would also do little to help millions of struggling young Americans of all backgrounds.

Real reform of community colleges would also engage the education-technology revolution that is passing too many postsecondary education institutions by. Low-cost, high-speed broadband has the potential to transform workforce training, creating enormous economic and social opportunity by including people of all socioeconomic backgrounds. For example, the University of Colorado’s College of Engineering and Science recently launched a program to help its students master communications technologies to collaborate with engineers from around the world. Designed to teach students the online skills they need to succeed in business, the program saw a diverse student body—50 percent female, 30 percent Latino—in its first year. The emergence of massive open online courses and customized education is also of great promise, and could even encourage higher completion rates—an area of concern in the postsecondary education industry.

If community colleges realigned their mission to prioritize workforce preparedness, the growing socioeconomic divide Kahlenberg writes about would likely be to a certain extent reversed. Perhaps more students of varied backgrounds would want to enroll if they knew the associate degree held more clout in the workforce. The segregation that plagues today’s system would improve organically, in a virtuous cycle, without heavy-handed government mandates.

A second problem with Kahlenberg’s essay is his assumption that the end goal of the community college system is for everyone to get a four-year degree. Here Kahlenberg is not alone; it seems as if the bachelor’s degree is seen by the entire postsecondary education industry as the Holy Grail for the economic woes that afflict young Americans.

This is simply not true. Not every job requires a four-year degree and not everyone needs one. For example, according to the Bureau of Labor Statistics, over the next decade new jobs requiring either an associate degree or a postsecondary non-degree award are expected to grow faster than jobs requiring a bachelor’s degree. Many of these jobs—such as those for medical or engineering technicians, or for computer support specialists—pay well and are vocational or technical. This suggests some four-year students could probably get a better return on investment from a two-year credential or non-degree certification.

The fact is that when it comes to a bachelor’s degree, it matters where you go to school and what you study. While on average those with a bachelor’s degree earn $1 million more in their lifetime than those without, the variance in return on investment is large.

There is no question that some form of postsecondary training or education is necessary in today’s economy. Young Americans without education beyond a high-school diploma are dropping out of the labor force at an alarming rate, or working less, unable to compete for decent jobs. But the question we should be asking is: What type of postsecondary credentials do we need? We must design postsecondary education policies that reflect the reality on the ground by promoting more alternative pathways into the workforce outside of a bachelor’s degree.

This brings us to the third flaw in Kahlenberg’s analysis. By wanting to funnel everyone into four-year schools, he ignores the fact that the four-year model is already beginning to implode. It turns out that the recent building binge of four-year colleges may not have been the greatest idea, as we are now saddled with many ineffective four-year schools. A painful truth is that the failure of postsecondary education is not confined to community colleges, and many four-year institutions are also facing tough questions from students and parents.

Young college graduates know all too well that having a bachelor’s degree is not a guaranteed ticket to financial success. They have seen their real average annual earnings drop by 15 percent over the last decade, as the hollowing out of middle-skill jobs over that time has forced more graduates to take lower-paying jobs that do not require a four-year degree. In fact, my research has shown that college graduates are forcing those with less education and experience out of the labor force—what I call the “Great Squeeze.” At the same time, they face rising student debt levels, now more than $29,000 per borrower. Too many young Americans are leaving the postsecondary education system with thousands in debt and little to show for it.

In his essay, Kahlenberg argues that four-year institutions provide a better service because they spend more per student than community colleges. He notes that “stunningly, over the past decade, inflation-adjusted spending on public research universities has increased roughly $4,200 per student, compared with just a $1 per student increase for community colleges.”

But this just shows how much more expensive it is to provide everyone with a four-year degree. Further, it wrongly assumes that because four-year research universities spend more per student, the student is getting a better education. The most recent data shows in that 2011, public universities spent more on “auxiliary enterprises,” which includes bookstores, dorms, and dining, than on academic support and student services.

Moreover, public funding for postsecondary education has been decreasing across the board, with four-year colleges also feeling the pinch. In Colorado, for example, annual public funding for postsecondary institutions is expected to decrease to zero by 2022. As state spending falls and tuition rises, the federal government has shouldered the burden of ensuring equal access. This includes the expansion of federal student aid and programs like income-driven repayment. According to the College Board, Pell grants are up 118 percent over the last decade. It turns out the increased spending per student at public universities is being paid for in large part by the student and the taxpayer.

By encouraging everyone to get a four-year degree, we will add more debt on the backs of young Americans and put greater strain on the federal aid system. This is especially true if more young Americans feel obligated to pursue graduate school to stand out to employers, taking on even more debt in the process. We need to have other viable pathways into the workforce that don’t require major time and financial commitments.

What we need is a community college system that can stand on its own. It should be a standard, if not common, pathway into the workforce. Its success should depend on how many students are able to achieve a decent standard of living upon completion, with transfers into four-year colleges as one possible option. Certainly, some colleges are getting the formula right, leading the way with innovative practices and programs that integrate local employers to the benefit of their students. Yet such cases remain the exception rather than the rule.

The goal of the postsecondary education system should be to facilitate America’s workforce preparedness. Only when we realize that multiple pathways are needed to reach this goal—rather than a one-size fits all approach—will we undertake the radical reforms we truly need.

This article was originally posted by Democracy.

Book review: Reclaiming America’s fiscal freedom

Posted on by The Progressive Policy Institute

There’s a lull in Washington’s budget battles, but it won’t last. Inevitably, the fight will flare up again, because the nation’s spending and tax policies are fundamentally at odds with what it will take to restore shared prosperity in America.

For now, though, it’s a relief to be spared another mortifying spectacle of fiscal brinkmanship.  After their 2010 midterm sweep, Republicans were convinced they had won a mandate for drastic cuts in federal spending. Spurning compromise, they shut down the government and repeatedly pushed the country to the brink of default. Such reckless antics shook investor confidence in the U.S. economy, triggered a credit downgrade and made America look like a banana republic.

While tea party zealots were chiefly to blame, Democrats didn’t exactly cover themselves with glory, either. President Obama lost his gamble that Republicans would relent in their opposition to tax hikes rather than let the budget sequester gouge big holes in defense spending. And by rejecting serious entitlement reform, Congressional Democrats allowed domestic spending to bear the brunt of deficit reduction. Continue reading “Book review: Reclaiming America’s fiscal freedom” →

National Journal: Public-Private Partnerships Hinge on Tax Policy

Posted on by The Progressive Policy Institute

In “Public-Private Partnerships Hinge on Tax Policy” Fawn Johnson of the National Journal discusses a policy memo released last week by Diana Carew, economist at PPI. In this article Johnson notes that public-private partnerships are becoming less partisan and more of an across the aisle issue. Johnson also elaborates on Carew’s memo, particularly Carew’s argument for changing the tax code in order to foster more public-private partnerships.

“Increasingly, however, public-private partnerships are becoming a topic of conversation among Democrats, another signal that the Eisenhower, big-government highway era is over. (We’ve known that’s been coming for several years.) Last week, the Progressive Policy Institute, a Clinton-era think tank, released a policy memo making the case that public-private partnerships are a good way to supplement our infrastructure needs without relying on the government to fund everything.”

You can read the rest of the article, as well as Carew’s policy memo, on the National Journal’s website, here.

How Public-Private Partnerships Can Get America Moving Again

Posted on by The Progressive Policy Institute

Nowhere is America’s chronic underinvestment in infrastructure more visible than in the nation’s transportation systems, which present a sorry picture of crumbling bridges, congested freeways, shabby airports, crammed transit and slow freight and passenger trains. We strive to be a first-class economy, but we cannot achieve that status with second-rate infrastructure. To put America back on a high-growth path, we must invest in repairing and upgrading our nation’s transport systems.

Today’s political landscape presents an opportune moment for Democrats and Republicans to act on addressing our deficient infrastructure. The Federal Highway Trust Fund, the main funding program for highways, is set to go broke at the end of this fiscal year without Congressional intervention. The Department of Transportation is also up for reauthorization with the expiration of the Moving Ahead for Progress in the 21st Century Act (MAP-21), which accounts for most federal transportation infrastructure financing programs. Providing financing certainty through long-term legislative commitments today means fewer project delays or cancellations tomorrow.

By making investment in infrastructure a priority now, and not letting partisan politics dictate the conversation, we can sieze this opportunity to enhance our future competitiveness. Over the last decade, public funding for transport infrastructure has been falling at all levels of government. This is true in recent years, even though interest rates are at historic lows.

The question, then, is how to get the biggest bang for the federal buck. Given the reality of continued fiscal constraints, it is increasingly clear that we cannot rely solely on more government spending. Instead, policymakers must also embrace a new model of infrastructure finance, one that creatively engages private resources to meet our infrastructure investment needs.
This report shows how public-private partnerships (PPPs) already have begun to break the traditional government monopoly on infrastructure spending. PPPs, also known as “P3s” and, increasingly as “performance-based contracting,” are a form of project finance that combines long-term public and private financing. Over the last few years, cities and states across the country have embarked on ambitious PPP projects to get America moving again, from the Port of Miami tunnel project, to modernizing Gary airport in Indiana, to creating the West Coast Infrastructure Exchange. While this report focuses on transportation infrastructure, the proposals put forward certainly apply to other forms of infrastructure, including water, energy, telecommunications, and social infrastructure such as schools, hospitals, and courthouses.

PPPs have several key advantages over traditional public funding. First, using public dollars to leverage private investment means lower burdens on taxpayers and less borrowing to maintain and improve infrastructure. Second, private businesses, who need to be assured a decent rate of return on their investment, bring market discipline to bear on both the selection and the management of projects. Risk-sharing with the private sector encourages innovation in project design, and cost-saving techniques in project construction and operation. Third, depoliticizing decisions about where to invest scarce infrastructure dollars can boost public confidence that their tax dollars aren’t being wasted on pork-barrel projects.

For all these reasons, PPPs have been growing, but their potential is still much greater. Skepticism among private investors about governments’ grasp of basic principles of project finance are limiting widespread use, as is the fact that appropriators often are reluctant to give up the power to steer public infrastructure spending toward favored interests and communities. Further, some political activists object in principle to private sector involvement in providing what they see as ineluctably “public goods,” whether they are roads, prisons, water systems or schools.

Perhaps more important, however, is the lack of understanding, especially at the state and local level, of how PPPs work and how to structure deals that generate market returns while also serving public needs. Only a handful of states make extensive use of PPPs, and 26 states have no experience at all with them.  And 17 states have yet to pass laws enabling public-private projects.

This report argues for policies that educate decision-makers about project finance, encourage the standardization of processes and documents, and promote regional collaboration. Washington, as the main provider of infrastructure funding, has an especially critical role to play. As such, this report also underscores three urgent priorities for federal policymakers:

  • First, Congress should pass legislation that enables states to issue more tax-exempt private activity bonds for PPP infrastructure projects, and expand their scope beyond surface transportation. The transportation infrastructure carve-out for private activity bonds in the tax code was authorized by Congress in 2006, but the $15 billion ceiling is expected to be reached in the near future.
  • Second, Congress should encourage foreign investors to join in projects aimed at rebuilding America’s economically vital infrastructure. This will require reforms to the Foreign Investment in Real Property Tax Act that currently sets the tax rate for the majority foreign of owners at 35 percent on all capital gains, much higher than the rate for domestic investors. President Obama has previously advocated such reforms, explicitly for the purpose of increasing foreign investment in America’s infrastructure.
  • Third, Congress should set up a national financing facility or fund to provide money and project finance expertise to infrastructure projects of national significance. Both the House and Senate currently have proposals to create an American Infrastructure Fund. But if partisan paralysis prevents Congress from acting on such proposals, PPI proposes a fallback—to expand and work within the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, a de facto infrastructure facility within the Department of Transportation.

Download the entire memo.

The Hill: Cutting through the regulatory thicket

Posted on by The Progressive Policy Institute

Representatives Patrick Murphy (D-Fla.) and Mick Mulvaney (R-S.C.) wrote an op-ed for The Hill published today on their Regulatory Improvement Commission (RIC) bill.  PPI’s RIC proposal, written by Michael Mandel and Diana Carew in May 2013, was brought to the Senate floor as a bill last year, followed by the recent bill in the House of Representatives, in both cases garnering significant bi-partisan support.  As the op-ed explains:

According to the Progressive Policy Institute, there were 169,301 pages in the Federal Code of Regulations in 2011, an increase of almost 4,000 pages from just a year earlier. Expecting businesses, large or small, to comply with such a bloated body of rules detracts from their core function of producing better goods and services while creating jobs.

You can read about the RIC, the bill in the House, and the rest of the op-ed on The Hill’s website, here.

Gigaom: The FCC cares about peering fights, but how will it act?

Posted on by The Progressive Policy Institute

On May 27th PPI hosted an event titled “Should the FCC serve as Internet Cop?”  The event consisted of a panel discussion as well as a keynote speech from Ruth Milkman, Chief of Staff to the FCC Chairman Tom Wheeler. Milkman discussed the role of the FCC in relation to Internet Service Providers (ISPs).

“Ruth Milkman, Chief of Staff for FCC Chairman Tom Wheeler discussed the fights in the interconnection market today at a speech at the Progressive Policy Institute, signaling that the FCC may be ready to act on the issue of last mile ISPs such as Comcast, charging content companies like Netflix, Apple or Google for the right to directly interconnect with their networks.”

Read the full article on Gigaom’s webiste.

Politic365: Government Investment Best Suited for Transportation Infrastructure

Posted on by The Progressive Policy Institute

In “Government Investment Best Suited for Transportation Infrastructure,” Jessica Washington of Politic365 discusses the recently released report by PPI economists Diana Carew and Dr. Michael Mandel. Washington summarizes the report and agrees that private companies are the best option to provide high-quality and dependable broadband, while the government would be better suited to focus on public interest by increasing transportation infrastructure.

A recently released report by Diana Carew and Dr. Michael Mandel of the Progressive Policy Institute says government investment is best spent on transportation infrastructure rather than on broadband buildout. For every $1 invested in roads, bridges, and public transit systems, the economy receives a $1.5 to $2 benefit.”

The rest of this article, along with Carew’s and Mandel’s report, can be found at Politic365.

Senate’s Failure to Move Patent Reform Stifles Innovation

Posted on by The Progressive Policy Institute

In this year of partisan gridlock, there have been precious few issues that enjoyed broad bi-partisan support. Patent troll reform has been one of them – until now. With word out today that the Senate has set aside their effort on patent troll reform, gridlock has succumbed another victim. This time, the victims are businesses across the country who are being extorted by patent trolls.

As the President has explained in calling for reform, patent trolling is a litigation abuse play. “Trolls” are shell companies that buy dormant patents, wait for others to independently develop new technology, and then accuse them of infringing on their patents. They strategically price settlement demands below the cost of defending the claim, knowing many companies will pay them to go away, rather than defend the rights to their own inventions. The Progressive Policy Institute published a paper titled, Stumping Patent Trolls on the Bridge to Innovation in October 2013 making the case for why these reforms are needed.

When the President called for targeted litigation reforms and the House obliged with a bi-partisan bill that passed 325 to 91 at the end of last year, hopes were high that the Senate could get something done. We commend Senators on the Judiciary Committee and their staffs for spending so much time and energy on this issue. We urge them not to give up or be distracted by issues irrelevant to patent litigation. The stakes are too high for too many people.

Where are the Big Data Jobs?

Posted on by The Progressive Policy Institute

The recent White House report on big data has garnered a great deal of public attention, both for its strong support for big data as a “driver of progress” and for its highlighting of privacy concerns. The bottom line of the report: “Americans’ relationship with data should expand, not diminish, their opportunities and potential.”

However, the authors of the White House report paid little attention to one important economic topic: Big data as a jobs creator. Big data is creating a wide variety of jobs, from data analysts to software developers to the people who run the massive data warehouses that are essential to almost every large company these days. This jobs impact should be an important part of policy considerations about big data.

In this memo, we estimate the number of ‘big data’ jobs in the U.S. economy as of May 2014. We define a big data job as a computer and mathematical occupation that uses big data skills, such as data analytics or knowledge of big data programs such as Hadoop or Cassandra. We track these big data jobs using a want-ad methodology developed by South Mountain Economics LLC in a series of papers on App Economy employment and a forthcoming analysis of big data and medtech jobs in Great Britain.

We find that the United States now has about 500,000 “big data” jobs. Roughly 100,000 of these jobs are in California, and another 100,000 are in New York, Texas, and Washington. Table 1 lists the top ten states for big data jobs, as of May 2014.

Download the policy brief.

The Hill: Panel to cut red tape gains Dem support

Posted on by The Progressive Policy Institute

On Tuesday, May 20 Will Marshall, PPI President, joined a bipartisan group of House members to announce a proposal for a Regulatory Improvement Commission that would weed out accumulated rules and modernize outdated federal regulations in an effort to spur growth and innovation. PPI was noted for its work on the proposed legislation in Benjamin Goad’s article for The Hill. Goad also quoted statements made by Marshall during Tuesday’s press conference.

Thus far, the push has attracted support from two dozen members of the House and Senate, including 10 Democrats. The Progressive Policy Institute (PPI) is also pressing the idea.

Officials from the group noted that every president from Jimmy Carter to President Obama has directed his administration to root out overly burdensome rules, though they said none has made sufficient progress toward addressing the accumulation of new rules, continuously layered upon the old ones.

“It’s not because we hate regulations,” PPI President Will Marshall said. “It’s because we love economic growth and innovation.”

Read the full article on The Hill’s website here.

A Politically and Technically Feasible Approach for Handling Regulatory Accumulation

Posted on by The Progressive Policy Institute

Regulatory accumulation threatens the pace of innovation and growth in America, yet previous attempts to address it have proven unsuccessful. That is why we propose a new approach through the creation of a Regulatory Improvement Commission, which we argue is both politically and technically feasible. This institutional innovation for paring down redundant and outdated rules is described more fully in a 2013 paper we co-authored, and it has now been introduced as very similar bills in both the Senate (by Senators Angus King (I-ME) and Roy Blunt (R-MO)) and the House (by Representatives Patrick Murphy (D-FL), Mick Mulvaney (R-SC), and 20 co-sponsors).

Each President since Jimmy Carter has ordered agencies to do a “retrospective review” of existing regulations in order to identify those that are duplicative, obsolete, or have failed to achieve their intended purpose. However, as a 2007 U.S. Government Accountability Office(GAO) study indicated, these retrospective reviews have fallen well short of identifying problematic regulations for a variety of reasons, including insufficient transparency and a lack of resources. It is extraordinarily expensive and time-consuming to properly evaluate the costs and benefits of any substantial part of any major regulation. Ultimately, an agency has no control over the original enabling legislation as written by Congress.

Rather than getting wrapped up in ideological issues such as big versus small government, we view the question of regulatory accumulation as a problem of institutional design. There is a well understood political and technical process for the creation of a regulation that involves both the executive and legislative branches of government. Presented in the simplest terms, the process starts with the approval of legislation by the House and Senate, which is then signed into law by the President. Next, the appropriate agency goes through a specified rulemaking procedure, which includes soliciting and answering public comments. For significant rules (those expected to have an annual impact on the economy of $100 million or more), agencies must also get approval from the Office of Management and Budget.

Although the process for new rulemaking is well specified under current law, our regulatory system offers no well-defined process for undoing or improving a specific regulation after it has been adopted. The only real option is to jump through the full set of political and procedural hoops described above that created the original regulation.

Our proposal for a Regulatory Improvement Commission (RIC, or the Commission) takes a more streamlined approach. Modeled after the Base Realignment and Closure (BRAC) Commission, the RIC would be approved by Congress for a limited period of time. The Commission would be staffed primarily with personnel “borrowed” from federal agencies, and RIC members would be appointed by the President and the congressional leaders of both parties. Further, the Commission would have clear objectives, be completely transparent, and follow a strict timeline.

The Commission would focus on a limited list of regulations – say, 15 or 20 – to be considered for repeal or improvement. It would base its proposals on suggestions submitted through public comment, coupled with public testimony and a quantitative and qualitative assessment of the rules in consideration. The RIC’s list of proposals would then go to Congress for an up or down vote with no amendments, and finally to the President for approval.

By including both the legislative and executive branches in reviewing regulations, the RIC can adopt a streamlined process for the consideration of regulatory changes. In addition, the Commission would not break or change the current process for creating regulations, nor would it raise any constitutional questions. All it would require is enabling legislation and some attention to internal congressional rules.

Our proposal acknowledges the importance of politics in the regulatory process. Ultimately the basis for regulation rests on enacted legislation, which is the result of a long and complicated political process. Cost-benefit analysis alone, no matter how persuasive, cannot overcome legislative action.

Perhaps most important in the current political climate, the proposed Regulatory Improvement Commission should be acceptable to both Republicans and Democrats because it gives Congress “two bites” at the apple. The first bite is when the original enabling legislation for the Commission is passed. Initially, Congress may opt to keep certain regulations that are particularly controversial off the table, such as environmental regulations.

The second bite comes when the proposed package of regulatory changes goes to Congress for approval. If the package does not appropriately balance the interests of both Democrats and Republicans, Congress can vote the package down.

Importantly, the RIC would help build trust in the retrospective regulatory review process. Like the BRAC Commission, the proposed Regulatory Improvement Commission is a one-shot deal that must be re-authorized by Congress. If the initial Commission is successful, Congress may be more willing to authorize it again.

The Regulatory Improvement Commission can be compared to something that sounds superficially similar: the SCRUB Act, which stands for the Searching for and Cutting Regulations that are Unnecessarily Burdensome Act and was recently discussed by a House subcommittee. The SCRUB Act would set up an independent commission to review regulations and forward proposed changes or repeals to Congress. However, under the SCRUB Act, the regulatory changes would go into effect unless Congress passed a resolution rejecting them.

We view the SCRUB Act commission as both politically and technically infeasible compared to the Regulatory Improvement Commission. Politically, it would be impossible for Democrats to approve any commission that possesses effectively unlimited powers to undo regulations. Additionally, the SCRUB Act raises certain constitutional issues, such as the delegation of legislative authority to a commission, that are difficult to surmount. For these reasons, we view the Regulatory Improvement Commission as far more likely to be effective than the independent commission proposed in the SCRUB Act.

Institutional innovation requires both a willingness to believe that things can be different and pragmatism about what is possible. It is clear that modern economies require some way of pruning down regulatory accumulation. The Regulatory Improvement Commission would be a first step in that direction.

This post was originally published on the University of Pennsylvania’s RegBlog, you can read it on their website here.  It is part of RegBlog’s five-part series, Debating the Independent Retrospective Review of Regulations.

Letting Innovation Out of the Box

Posted on by The Progressive Policy Institute

Innovating in the digital age requires flexible rules that keep pace with the latest technology. This is especially true in the video services market, where change has been fast and furious. That’s why Congress should act to repeal an expensive and innovation-restricting requirement on the design of set-top cable boxes.

Currently the FCC mandates that each cable box — the electronic device in your home that links your TV with your cable provider — use a particular type of technology known as a “CableCARD” that contains the security mechanisms needed to receive programming. The FCC’s rule, formally known as the “integration ban,” requires that these security functions cannot be hard-wired or otherwise integrated within the rest of the box.

The CableCARD requirement is a classic example of prescriptively regulating in order to reach a certain outcome. In this case, the desired outcome was competition, to create a retail market for set-top boxes. In its order the FCC stated the integration ban would “result in a broad expansion of the market for navigation devices so that they become commercially available through retail outlets.” The idea was for customers to buy cable boxes instead of leasing them, a universal box that could be used across providers with a removable CableCARD. It would be a marketplace similar to telephones.

But the intended outcome, a retail market for set-top boxes, never developed. Consumers just didn’t want to mess around with another piece of electronics that could potentially become outdated or incompatible. Instead, the overwhelming majority of consumers lease their set-top boxes through their cable provider. Moreover, an increasing number of consumers access digital programming from smart devices outside of traditional TV, such as tablets and smartphones. And, perhaps most telling, the introduction of YouTube, Hulu, Netflix, Amazon Prime and other delivery channels created different ways to access digital programming without a cable box. Recent research shows more people are cutting the cord on their cable subscription, particularly young people that are a key customer-building demographic.

The integration ban may have been well-intentioned, but the rule now accomplishes little more than impose old technology onto cable providers and consumers. Innovators are in the process of developing a “boxless” method of delivering cable service, where all control and delivery processing occurs in the cloud. But that requires flexibility in the evolution of box design, rather than the current rigid set-top box integration ban rule. Cable customers ultimately pay the price of the ban by missing out on the potential pace of innovation.

Fortunately there is an opportunity to repeal this outdated rule, with fresh momentum in Congress. The House will likely pass the repeal with bipartisan agreement, and it is now up for discussion in the Senate. Importantly, the current proposal preserves the CableCARD standard for use in retail devices like the TiVo, only affecting how these security features are embedded in boxes leased from the cable company. Customers can therefore continue to purchase their boxes, and retail sales could still become a bigger share of the set-top box market if that is the direction in which it evolves.

The world of digital programming no longer revolves around cable companies. It is time policymakers recognize the new face of competition in the video industry and let the tremendous pace of investment and innovation speak for itself. Repealing the set-top box integration ban would be a small but positive step forward in modernizing regulation for the data-driven economy.

This op-ed was originally posted by RollCall, you can read it on their website here.

PPI President Joins Bipartisan Group of U.S. Representatives to Unveil Regulatory Improvement Commission Proposal

Posted on by The Progressive Policy Institute

WASHINGTON—Progressive Policy Institute (PPI) President Will Marshall today joined Representatives Patrick Murphy (D-Fla.), Mick Mulvaney (R-S.C.) and a bipartisan group of House members to unveil major regulatory reform legislation based on a proposal by PPI to tackle regulatory accumulation, the harmful layering of new federal rules atop old rules year after year.

The Regulatory Improvement Act of 2014 (H.R. 4646) would establish an independent advisory body authorized by Congress—the Regulatory Improvement Commission (RIC)—to review, remove or improve existing outdated, duplicative or inefficient regulations as submitted by the public. The legislation is identical to a Senate companion bill (S. 1390) introduced by Senators Angus King (I-Maine) and Roy Blunt (R-Mo.).

“Regulatory overload is suffocating economic growth and stifling innovation in the United States,” said Michael Mandel, PPI Chief Economic Strategist. “Regulations are essential for a well-functioning economy, but the federal government needs a systematic mechanism for improving or removing regulations that have outlived their usefulness. The RIC would effectively ‘scrape the barnacles off the bottom of the boat’ and allow our nation’s businesses to move forward on innovating and hiring workers.”

Originally conceived by PPI economists Michael Mandel and Diana Carew, the RIC is modeled after the highly successful military base-closing commission. It would consist of nine members appointed by Congressional leadership and the President to consider a single sector or area of regulations and report regulations in need or improvement, consolidation, or repeal.

Both Houses of Congress would then consider the Commission’s report under expedited legislative procedures, which allow relevant Congressional Committees to review the Commission’s report but not amend the recommendations. The bill would then be placed on the calendar of each chamber for a straight up-or-down vote.

Following its report, the RIC would be dissolved and must be re-authorized each time Congress would like to repeat this process to avoid the creation of a new government bureaucracy.

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