issue: Telecom

America’s Digital Policy Pioneers

Posted on by The Progressive Policy Institute

On Wednesday, we honored Larry Irving, Ambassador Bill Kennard, Ambassador Karen Kornbluh, Ira Magaziner, and Michael Powell as digital policy pioneers at our event “Enabling the Internet: A Conversation with America’s Digital Policy Pioneers.” Each of these individuals made important contributions to that led to the exponential growth and the Internet’s rapid emergence as a tool for communication, information access, global commerce and social networking. PPI brought them together on one stage to continue our ongoing conversation about how government can collaborate with private enterprise to take advantage of technology as a major engine of the U.S. economy.

These leading architects of U.S. digital policy, looked back to the early debates and key decisions over Internet regulation, and forward to the modern challenges of data security and privacy, international governance, the advent of the “Internet of Everything,” and national firewalls abroad. Larry Downes, the panel’s moderator, guided the conversation by asking the panelists to describe the challenges they faced in the first days of the “information superhighway” and extrapolate how those lessons might be applied to the decisions facing policy makers today at home and abroad. A consensus was built around the principles of bipartisanship and the idea that legislation of new technologies should always lead with “do no harm.”


2013 Digital Policy Pioneers: Ira Magaziner, Ambassador Karen Kornbluh, Larry Iriving, Michael Powell and Ambassador Bill Kennard

NYTimes – Room for Debate: The Threat Is Small, the Opportunies Are Great

Posted on by The Progressive Policy Institute

Investors shouldn’t be overly concerned about the high level of stock prices, for two reasons. First, the market boom has not yet translated into excess spending in the real economy. Household spending is still weak, as shown by retailers rushing to open their stores on Thanksgiving. Many large businesses are reluctant to commit to big capital spending projects, while home building remains low compared to the mid-2000s. So even if the market dropped suddenly — which could happen — the plunge wouldn’t drag down the rest of the economy.

By contrast, during the 2006-2007 finale of the housing/finance boom, consumers, home buyers, home builders and stock investors all fed each others enthusiasm. Rising home prices allowed Americans to borrow and spend, lifting profits and stock prices of consumer product companies. Similarly, the housing boom helped the profits and stock prices of home builders and mortgage lenders. So the post-2007 collapse of the stock market coincided with a collapse of consumption and home building. That’s not going to happen this time.

Second, history suggests that a tech-driven stock market boom can broadly benefit Americans by boosting business investment, creating jobs, and encouraging innovation. Let’s look back at the tech boom and bust of the 1990s, which peaked in 2000. That year, business investment hit almost 15 percent of gross domestic product, compared to today’s 12 percent. And it wasn’t useless investment either — companies were spending on new computers and software, while telecom upstarts such as WorldCom and Global Crossing created huge new fiber-optic networks. Simultaneously, the unemployment rate dropped below 4 percent. True, WorldCom and Global Crossing went bankrupt after the boom ended, as investment in networks outran the immediate demand for bandwidth. But the fiber remained, setting the stage for today’s connected world.

Today’s stock market boom is not yet having a broad impact on business investment. However, the strong market makes it easier for young tech companies such as Twitter to go public and raise capital for expansion. As a result, tech-related jobs are growing, including a 26 percent increase for blacks and Hispanics in computer and mathematical occupations over the past two years. What’s more, the prospect of a successful public offering at a high stock price encourages investors to fund innovative new companies in cutting-edge technologies such as big data analysis, online education, health-related mobile apps and software, cloud storage, financial payment networks, the Internet of Everything and 3D printing.

Will some or most of these companies fail? Of course. But a booming stock market that helps fuel innovation and job growth is a net plus for the U.S. economy.

The New York Times published this article by PPI’s chief economic strategist, Michael Mandel.  You can find the original article here.

 

NYT: Gross Domestic Freebie

Posted on by The Progressive Policy Institute

Tyler Cowen writing for the New York Times quoted PPI’s Michael Mandel, chief economic strategist, on how over regulation is an impediment to the development of the economy.  In the article, Mandel explains the combined negative effect of seemingly small inhibitions:

“Michael Mandel, an economist at the Progressive Policy Institute, compares many regulations to “pebbles in a stream.” Individually, they may not have a big impact. But if there are too many pebbles, a river’s flow can be thwarted.”

Read the entire New York Times article here.

Is PAYE Paying for the Wrong Higher-Ed Model?

Posted on by The Progressive Policy Institute

Universal adoption of today’s high-speed, low-cost broadband could move the current higher education model into the 21st century. But are federal student aid programs like Pay As You Earn (PAYE) – a student loan repayment plan based on borrowers’ annual incomes – delaying the industry’s transition?

Quite possibly. One potential consequence of Pay as You Earn (PAYE) is that it enables colleges to transfer the cost of less effective industrial organization to taxpayers, allowing them to maintain status quo practices.  The result of less effective higher-ed administration, during a time of rising enrollment, is higher costs. As I explain in my new FAQ sheet, PAYE gives colleges and universities no incentive to curb excessive increases in tuition, because there is no accountability.

Instead of managing tuition, through harnessing the power of broadband to provide mass education and workforce training at lower cost, more colleges are relying on federal aid and debt repayment programs like PAYE. That’s why we are starting to see more schools like GW admitting to “need-aware” admissions policies, and schools like Georgetown taking obvious advantage of the current federal student aid system and income-based repayment plans. And that’s why we are seeing the dramatic rise in outstanding student debt, along with reports of the long-term financial strain it is placing on young Americans.

This week, I spoke on a panel at the Urban Ideas Forum 2013 on “Advancing a Broadband Agenda for Urban America,” that covered the importance of broadband in spurring economic growth and innovation. The key takeaway was that the power of broadband, and the tremendous potential economic and social benefits it can facilitate, will only be possible if adoption is universal.

But realizing the full potential of broadband means the post-secondary education industry must buy-in through systemic adoption. The post-secondary education industry is fast approaching a fork in the road: either it can maintain its role as the premier workforce preparation vehicle, or it can lose competitiveness to alternative sources of post-secondary training provided at lower cost. The first requires the industry to realign itself more closely with the needs of employers, and to cut costs by integrating the power of broadband into its education model. The second is inevitable if the industry maintains its status quo practices, most predominately at second and third tier four-year institutions.

Decision-making time for U.S. colleges and universities is coming, in spite of federal student aid and programs like PAYE. The latest report from the College Board shows average tuition at four-year public universities for this academic year rose at twice the current rate of general inflation, and the difference was even greater at four-year private universities. With rates like this, how long will it be before another provider of workforce training swoops in at lower cost, or before consumers – students – look elsewhere?

The PPI Tech/Info Job Ranking

Posted on by The Progressive Policy Institute

The last few years have been tough for many cities and localities. Most places have not yet fully recovered from the financial collapse, either in terms of jobs or revenues. High growth seems unattainable.

But some cities and localities—ranging from New York to New Orleans to Davis County, Utah—are doing unexpectedly well. What they have in common: Strong growth in the tech/information sector. This sector ranges from tech startups to Internet firms such as Google and Facebook to telecom providers such as AT&T and Verizon to content producers such as newspapers and movie studios (see definition below).

New analysis by the Progressive Policy Institute shows that places with strong tech/information growth have survived the recession much better than their counterparts. In particular, counties with a higher number of new tech/information sector jobs from 2007 to 2012 had enjoyed substantially faster growth in both overall private employment and non-tech jobs over the same period.

In order to quantify the link between the tech/information sector and overall growth, we have constructed the PPI Tech/Info Job Index. For each county, the Index measures the number of new tech/information jobs between 2007 and 2012, as a share of 2007 total private sector employment in that county. For example, an index of 1 means that new tech/info jobs equals 1% of total private employment.

On average, the top 25 counties, as measured by the Index, showed an average private sector job gain of 2.4% between 2007 and 2012. That doesn’t seem like much, but the remaining counties had a decline of 3.5%. In other words, a vibrant tech/info sector tended to make the difference between a local economy that had recovered by 2012, and one that was still in decline.

The implication is that policies to encourage tech/info growth are more likely to boost the overall economy. Innovation creates well-paying jobs. What’s more, the diversity of places on our list suggests a high-growth economy is not just for traditional tech powerhouses such as Silicon Valley, but has broader applicability.

Download the ranking.

How Many Wireless Carriers Does It Take to Satisfy a Regulator?

Posted on by The Progressive Policy Institute

At a Technology Policy Institute breakfast this week, telecom geeks were treated to a robust exchange of ideas between Jim Cicconi, Senior Executive Vice President of AT&T, and Reed Hundt, former chairman of the FCC. When the conversation turned to the upcoming spectrum auction, Mr. Hundt defended ex ante rules for limiting the number of licenses that any single carrier could acquire, arguing that ex post enforcement of excessive concentration would deprive bidders of the certainty they needed when constructing bids. Although that position was consistent with his prior views, Mr. Hundt surprised this blogger when he declared (in response to my question from the peanut gallery) that market forces—and not regulators—should dictate the optimal number of wireless carriers.

Was Mr. Hundt channeling his inner Reagan?  Even those who question the FCC’s role as “second antitrust cop on the beat” would be hesitant to permit consolidation among the largest two wireless carriers as market forces dictated. So that raised a follow-up question (which I did not get to ask): Can a regulator tasked with designing spectrum policy really be agnostic about the optimal number of wireless carriers?

It is hard to square Mr. Hundt’s prescription with the FCC’s approach to spectrum policy, including during Mr. Hundt’s tenure. When the FCC first started auctioning spectrum licenses, it decided to give companies the right to serve small, geographic areas rather than large, nationwide footprints. This resulted in myriad small carriers joining the fray to provide wireless services.

The country was cut into a Swiss-cheese board, which required at least a decade for carriers to cobble together enough local licenses to establish nationwide coverage. Given where we ended up—roughly four carriers per geographic area—one wonders whether it would have been more efficient (in terms of avoided transaction costs) to auction fewer licenses for more spectrum per geographic area right from the start.

Over the years, the FCC has gone even further in promoting its vision of an “optimal market structure” populated by several mom-and-pop companies—for example, by promulgating rules that encouraged entry by smaller carriers regardless of the strength of their business plan or qualifications to build and operate networks. Set asides, bidding credits, and bankruptcy ensued, stranding useable spectrum for decades and most certainly delaying some of the wireless innovations we’re  all starting to experience. But for a fleeting moment, we had more carriers than before, and that made regulators feel better.

Not to be dissuaded in this quest to induce more entry for the sake of inducing more entry, the Genachowski-led FCC issued a series of reports decrying the market structure for wireless as being excessively concentrated. Adhering to this basic, flawed assumption, the current FCC appears set on designing an upcoming spectrum auction to limit the amount of spectrum that the two largest wireless broadband providers can acquire.

In sum, the FCC’s spectrum policy has been the opposite of the “let the market decide” approach to market structure suggested by Mr. Hundt. While laissez- faire may not be the best alternative to the FCC’s heavy-handed approach, it would behoove regulators tasked with implementing spectrum policy to consider (1) the current demands being placed on wireless networks from the explosion of bandwidth-intensive applications, and (2) the oncoming inter-modal competition between wireless and wireline networks. Both of those factors elevate the importance of economies of scale in wireless services, and thereby militate in favor of fewer, beefier carriers.

If the answer to my market-design question that Mr. Hundt politely brushed off is three or four wireless carriers, then the FCC should revisit its self-appointed mission to focus almost exclusively on the number of competitors at the expense of enabling wireless providers to bulk up and take on their wired brethren. Let the competition for all broadband customers (as opposed to wireless broadband customers) begin!

Stumping Patent Trolls On The Bridge To Innovation

Posted on by The Progressive Policy Institute

President Obama brought much needed attention this June to “patent trolling,” a growing area of litigation abuse vexing America’s high-tech industries. In these lawsuits, shell businesses called Patent Assertion Entities (PAEs) or Non-Practicing Entities (NPEs)—some of which have been nicknamed “patent trolls”—game the patent and litigation systems. They purchase dormant patents, wait for others to independently develop comparable technology, and assert patent infringement suits. As the President explained, PAEs “don’t actually produce anything themselves.” Their quest is to “see if they can extort some money” by claiming they own the technology upon which the other companies’ products are built.

An attorney who used to defend these claims, Peter Detkin, is generally credited with popularizing the “patent troll” moniker. For software, consumer electronics, retail and the many other companies on the receiving end of these lawsuits, PAEs are reminiscent of the mythical trolls that hide under bridges they did not build, but nevertheless require people to pay them a toll to cross. Patent trolling, it turns out, is a better path to the holy grail than hiding under bridges. An oft-cited economic study pegged the overall impact of PAEs in terms of “lost wealth” at $83 billion per year, with legal costs alone amounting in 2011 to $29 billion, up from $7 billion in 2005. At least fifteen PAEs are now publicly traded companies.

This policy brief seeks to address three questions: what caused this recent and rapid rise in PAE litigation, what can be done to stop it, and what is the role for progressives? First, it identifies the confluence of factors that have come together in the past two decades to create the patent equivalent of a 100-year flood, focusing mostly on the explosion of new, widely used technologies, increasing ambiguity in the boundaries of today’s patents, and a litigation system incentivizing “ransom” settlements for even questionable infringement claims.

The brief then examines the adverse impact PAE litigation is having on the development and use of innovation, as well as on traditional patent cases brought by inventors the patent system was created to protect. It discusses the rich history of progressives in leading efforts to stop litigation prospecting, concluding that progressives should be at the forefront of this reform too. It then explores specific proposals the President, Senators Schumer and Leahy, and others have offered to safeguard the patent system from trolling abuse.

Download the memo.

Can the Internet of Everything Help Cities?

Posted on by The Progressive Policy Institute

Local governments are about delivering services and getting things done: Fixing highways, running buses, picking up trash, ensuring public safety, educating children. To do their job in an era of tight finances, what’s needed are technologies that make public services better and cheaper, and improve the quality of life for urban Americans without increasing costs.

So far the Internet and the shift to digital has boosted the efficiency of smart local governments, increased transparency, and made it easier to communicate with local residents. In many cities and towns it’s possible to look up property tax records online, for example; download essential forms and documents; or learn when the town dump is open. New York City is a leader in this area: its “OpenData” catalog contains more than one thousand data sets available to the public.

But the mere upload and download of data is not enough to get cities and towns out of their fiscal squeeze. That’s why, if we want to truly transform the delivery of public services, we need to look to the coming wave known as the  “Internet of Everything.”

What is the “Internet of Everything?” As I write in my new report, the Internet of Everything (IoE) is about:

…building up a new infrastructure that combines ubiquitous sensors and wireless connectivity in order to greatly expand the data collected about physical and economic activities; expanding ‘big data’ processing capabilities to make sense of all that new data; providing better ways for people to access that data in real-time; and creating new frameworks for real-time collaboration both within and across organizations.

In other words, IoE links things in the physical world with data, people, and processes, so that better decisions can be made in real-time.

On a national level, IoE can provide a tremendous boost to growth. We estimate that the Internet of Everything could raise the level of U.S. gross domestic product by 2%-5% by 2025. If this gain from the IoE is realized, it would boost the annual U.S. GDP growth rate by 0.2-0.4 percentage points over this period, bringing growth closer to 3% per year.

Part of these gains from the Internet of Everything would show up in the form of better and cheaper services provided by local governments. The key here is better decisions in real-time. One clear example comes out of the horrific flooding in Colorado. Having been hit by a devastating flood in 1997, the city of Fort Collins, CO, maintains a network of rainfall gauges and stream sensors which deliver real-time information on the potential for flooding both to a city website and to smartphones via an app. This connection with real time sensors enables both city officials and local residents to make better real-time decisions about when and whether to evacuate.

Cities can also use the Internet of Everything to help improve the mundane service of trash pickups. As my report notes:

The ‘smart’ trash and recycling stations from BigBelly Solar can sense how full or empty they are, and communicate wirelessly with the trash collection agency. Armed with this information, pickup trucks can go directly to the bins that are full, while skipping trash and recycling stations that are empty. The result: Cleaner streets, lower fuel usage, and fewer greenhouse gas emissions.

An essential service that is usually handled at the local level is transportation. Already more and more cities are using GPS systems to track buses and provide the information to passengers via apps. The next stage is to provide sensors that monitor waiting passengers, with the possibility of rerouting buses or having them skip stops in order to provide better service.

Or consider noise complaints, one of the most pervasive problems of big city living.  Noise can often be intermittent, making it very hard for local governments to adequately respond. However, smartphones are able to measure local noise levels, making it possible to build ‘noise complaint apps.’ Alternatively, low-cost sound sensors could help track troublesome noises in real time.

Finally, there is the most crucial local service of them all, education. Let’s focus on career/technical education. Businesses continue to complain about not getting enough skilled workers, but schools have been cutting back on CTE. Moreover, what they do offer is less directly relevant to today’s rapidly changing workplace, because it’s too expensive for most school districts—and CTE teachers–to keep up to date.

The Internet of Everything offers the possibility of lowering the cost of career/technical education by building sensors right into the equipment, which can offer immediate feedback to students. One offbeat example comes from Cisco, which built sensors into a basketball. In theory, that means someone trying to learn to play the game can automatically get corrections about how to shoot the basketball, enabling them to learn faster. The same principle can eventually be applied to career/technical education, lowering costs and speeding learning.

City officials face a historic challenge, and a historic opportunity.  With less resources, can they provide better services at lower cost? The Internet of Everything is no panacea, but it can assuredly help.

Continue reading at Techonomy.

Who are the U.S. Investment Heroes of 2013?

Posted on by The Progressive Policy Institute

In our newest report, “U.S. Investment Heroes of 2013: The Companies Betting on America’s Future,” we highlight the top U.S. Investment Heroes of 2013, as ranked by their U.S. investment.

PPI’s ranking of U.S. Investment Heroes for 2013 is led by AT&T, which invested almost $20 billion in the U.S. in 2012. The top five are rounded out by Verizon, Exxon, Chevron, and Intel, and together these five companies invested over $66 billion in the U.S. during the last year.* Total U.S. investment by the top 25 companies amounted to almost $150 billion last year, spent on high-speed broadband deployment, oil and natural gas production, and new corporate and retail facilities.

Telecommunications and cable, energy, and technology dominated this year’s Investment Heroes list, comprising 18 out of our top 25 companies. The fact that these three sectors are driving U.S. private fixed investment reflects their importance in driving U.S. economic growth.

Given the importance of investment as a path to sustainable growth, it is essential our economic policies make domestic business investment a priority. In our report we put forward four ways to encourage more U.S. investment: simplify the corporate tax system, invest in workforce training, don’t over-regulate innovative industries, and free up more spectrum.

*See full report for complete methodology and definitions.

 

U.S. Investment Heroes of 2013: The Companies Betting on America’s Future

Posted on by The Progressive Policy Institute

For too long, U.S. policymakers have focused narrowly on boosting consumers’ buying power, assuming that the productive end of the economy will take care of itself. Yet the last decade of slow growth shows that debt-driven consumption is not a sustainable strategy for expanding economic opportunity or lifting U.S. living standards. In contrast, a high-growth strategy requires strong investment—private and public—in our nation’s productive and knowledge capacities.

It’s time for progressives to rebalance the consumption-investment equation. Total domestic investment fell drastically during the recession and has yet to fully recover. A big part of the problem is the public sector. With gridlock in Washington and financial troubles at the state and local level, government real spending on productive assets from highways and bridges to computer equipment, net of depreciation, is down by half compared to the average level of the 2000s.

Investment by the private sector is doing better, but taken as a whole still falls way short of what the country needs to generate jobs and growth. As shown in Figure 1, business investment, outside of housing, is still 20 percent below its long-term trend. There are several reasons why private business investment is failing to reach its potential. Globalization, weak demand, deleveraging and a shortage of workers with technical skills all contributed to the investment fall-out and subsequent investment gap. And as PPI has documented elsewhere, the sheer accumulation of regulations over time can discourage capital investment and innovation.

Within this gloomy picture, however, are some bright spots—companies that continue to place big bets on America’s future, creating jobs and raising productivity in the process. Surprisingly, in a world of information overload, identifying these major contributors to the U.S. economy is not an easy task, since most companies do not break out their domestic capital spending. That’s why we undertook our second annual report on “U.S. Investment Heroes,” making a systematic analysis of publicly available information to rank nonfinancial companies by their capital spending in the U.S.

PPI’s ranking of U.S. Investment Heroes for 2013 is once again led by AT&T, which invested almost $20 billion in the U.S. in 2012. The list then follows with Verizon, Exxon, Chevron, Intel and Walmart. Together, we estimate these companies invested almost $75 billion in the U.S. in 2012, an astonishing total almost twice the GDP of Wyoming. Over the last year, these companies have poured capital investment into the deployment of high-speed broadband, oil and natural gas production, and new corporate and retail facilities.

As a general principle such spending provides both direct and indirect benefits to Americans. For example, a variety of studies suggest that investment in fixed and mobile broadband creates jobs. In fact, PPI Chief Economic Strategist Michael Mandel estimates that since Apple introduced the iPhone in 2007, the economy has created over 750,000 jobs related to mobile apps.

Indeed, telecommunications and cable companies are a major driver of U.S. investment today, sparking the rise of what we call “the data-driven economy.” The digital transformation of the U.S. economy would not be possible if high-speed fixed and mobile broadband networks were not in place. That’s why encouraging private investment in our nation’s broadband infrastructure is rightly a major priority for the Obama administration. Beyond that, robust private investment in smart devices, sensors, and “big data” analytics is sparking the emergence of the “Internet of Everything,” which could boost productivity and job creation in ‘physical’ industries such as manufacturing and transportation.

Our ranking of U.S. companies investing in America also shows the tremendous role energy—oil and natural gas production and power generation—has on U.S. economic growth. The shale oil and gas boom has turned old assumptions about energy scarcity on their head. It is lowering input costs for U.S. chemical companies and helping to revive U.S. manufacturing. It may also turn the United States into a major energy exporter, while creating jobs at home.

This report is the third in PPI’s “Investment Heroes: Who’s Betting on America’s Future” research series. That so many companies are choosing to invest elsewhere—or not at all—makes it all the more important to recognize those that are placing their bets on America’s future.

Download the memo.

 

Forbes: The Net Neutrality Parable Provides Clues Of How To Fix The FCC

Posted on by The Progressive Policy Institute

The net neutrality debate reached a fever pitch last week when the D.C. Circuit heard oral arguments in Verizon v. FCC. Although many pundits have predicted what the appeals court will do, let’s search instead for an instructive lesson for reforming the FCC, something that policy wonks on all sides of the debate agree is necessary.

For years, I have been peddling a “compromise” on net neutrality between the folks who want to level the playing field for websites (or “edge providers”) and the folks who want to turn down the lights at the FCC.

Before explaining the idea, a quick backgrounder is in order: In December 2010, the FCC issued its Open Internet Order, which effectively proscribed certain practices by Internet service providers (ISPs), including selectively blocking traffic and contracting for priority delivery with websites. Rather than imposing an outright ban on “pay for priority” contracts, the FCC sternly warned ISPs that “as a general matter, it is unlikely that pay for priority would satisfy the ‘no unreasonable discrimination’ standard.” Put differently, such arrangements would presumptively violate the FCC’s new “non-discrimination” rule, and the burden would be on the ISP to reverse that presumption if it was ever foolish enough to try such a thing.

Of course, these rules have nothing to do with discrimination in the classic sense—that is, treating someone or something differently on the basis of some exogenous attribute (such as age, race, or lack of affiliation). For example, under the FCC’s Open Internet Order, if Time Warner  (an ISP) entered into a pay-for-priority arrangement with Sony (a website) to support a Sony online-gaming application, that contract would presumptively violate the FCC’s “non-discrimination” rules even if Time Warner stood ready to extend the same economic terms to all comers. Calling these rules the “zero-price rule” or the “no-economic-relation” rule would have been more accurate, but less politically appealing.

Continue reading at Forbes.

Can the Internet of Everything bring back the High-Growth Economy?

Posted on by The Progressive Policy Institute

The United States and the other major advanced economies are currently stuck in a seemingly endless twilight of slow growth. The numbers are ugly: The April 2013 forecast from the International Monetary Fund predicts that economic growth in Europe will average only 1.7% over the next five years. Japan is projected to average only 1.2% growth. Germany, held up as a paragon of success, is expected to grow at only 1.3% annually.

The United States is doing better than Europe and Japan, but not by much. The nonpartisan Congressional Budget Office is currently projecting that the underlying growth rate of the U.S. economy—the so-called ‘potential’ growth—is around 2.2% annually, compared to an average of roughly 3.3% in the post-war period.

Both Democrats and Republicans in Washington, miles apart on most issues, have accepted the slow growth scenario. That helps explain, in part, the political gridlock in Washington. An economy growing at barely over 2% per year doesn’t generate enough income to pay for everything that Americans need: Social Security and Medicare for the aging population, defense spending sufficient to handle critical threats, and support for essential government investment in basic research, education, and infrastructure. The longer that the slow-growth assumption gets locked in, the more it becomes a self-fulfilling prophecy.

Yet we are not stuck with the slow-growth scenario and the endless and frustrating Washington policy debates about dividing a shrinking pie. Over the past year, a series of studies from research institutes and industry have laid out a compelling new vision of a highgrowth future—one that that could revolutionize manufacturing and energy, create employment for the jobless generation, and bring back rising living standards.

These new studies—from organizations such as the McKinsey Global Institute, GE, Cisco, and AT&T—describe the economic potential of a new wave of technological innovations known as the Internet of Everything (IoE)—also sometimes called the Internet of Things, the Industrial Internet or Machine to Machine. (Though as discussed below, the Internet of Everything is a broader, more accurate concept than the other terms, encompassing much more than just ‘things’.)

Taking the McKinsey projections as a base, we estimate that the Internet of Everything could raise the level of U.S. gross domestic product by 2%-5% by 2025. This gain from the IoE, if realized, would boost the annual U.S. GDP growth rate by 0.2-0.4 percentage points over this period, bringing growth closer to 3% per year. This would go a long way toward regaining the output—and jobs—lost in the Great Recession.

Equally important, from the macro perspective, the result will be a shift to growth that is not just faster, but higher quality. Rather than being fueled by consumption and borrowing, the Internet of Everything will lead to an economy built on production and investment, with much more extensive education and training built right into the fabric of the economy rather than being separated out.

Download the memo.

Let Everyone Bid in the Spectrum Auction

Posted on by The Progressive Policy Institute

In our new paper released today, we examine the economics and policies related to an upcoming spectrum auction by the Federal Communications Commission, illustrating that a more efficient regulatory system that facilitates competition and innovation can also provide essential consumer protection.

The auction, which the FCC hopes to conduct next year, is designed to enable continued expansion of mobile broadband and other wireless services by buying back spectrum now belonging to TV broadcasters and making it available to wireless service providers. As often happens in Washington, there’s a fight over how the auction should be structured—specifically a push by some smaller competitors to limit bidding by the largest providers, AT&T and Verizon. Such limits would effectively set aside a portion of low-frequency spectrum for the smaller rivals at discounted prices.

But we argue that such regulatory structures would needlessly complicate the auction process, undermine competition in the overall broadband marketplace, and make it difficult to meet consumers’ expectations for wireless service. Moreover, putting a thumb on the scales of the auction process is unnecessary. Rather than achieve the goal of enhanced innovation, we show that the rules proposed by smaller competitors could make innovation more difficult. Continue reading “Let Everyone Bid in the Spectrum Auction” →

The FCC’s Incentive Auction: Getting Spectrum Policy Right

Posted on by The Progressive Policy Institute

As the Federal Communications Commission (FCC) considers how to allocate the broadcasters’ spectrum in the upcoming “incentive auction,” it should be guided by economic principles designed to maximize social benefits. To date, the spectrum policy debate largely has been driven by considerations of the private benefits of carriers such as Sprint, T-Mobile/MetroPCS, U.S. Cellular, and other small carriers (collectively, the “smaller carriers.”).

In April, the Department of Justice (DOJ) weighed into this debate by advocating “rules that ensure the smaller nationwide networks, which currently lack substantial low-frequency spectrum, have an opportunity to acquire such spectrum.” Although it is natural instinct to root for the little guy, ensuring the livelihood of smaller carriers is not an appropriate policy objective, as that would counsel a range of subsidies and tax credits for handpicked competitors. Indeed, maximizing the number of wireless competitors is not the appropriate objective either; using spectrum allocation as a tool for reducing wireless concentration would require divvying up the spectrum in such thin slices as to render the resulting allocation virtually useless. The problem with these narrow objectives is that, if pursued to their logical extreme, the resulting policies would sacrifice massive (and growing) economies of scale associated with providing the capacity needed to support mobile video, telemedicine, distance learning, and a host of other bandwidth-intensive applications that consumers and small businesses are demanding from their mobile devices.

The spectrum policy debate must be informed by the tradeoffs inherent in spectrum aggregation: more (smaller) firms versus more robust wireless networks. As wireless consumers increasingly demand that their wireless devices support bandwidth-intensive applications such as mobile video, the optimal allocation of spectrum tilts in favor of more robust wireless networks. Focusing narrowly on reducing wireless concentration could result in a spectrum allocation under which wireless carriers lack the incentive to deploy next-generation technologies. If policymakers fear that “too much” spectrum in the hands of any one carrier raises anticompetitive issues, there are several ways to address those concerns that do not undermine investment in next-generation wireless broadband networks, and the attendant innovation that such investment engenders.

Download the entire backgrounder.

Telecom/Broadcasting Industry Leads in Investment Spending

Posted on by The Progressive Policy Institute

While I was waiting for my plane at Heathrow on Sunday, I spent a bit of time looking through BEA statistics on investment spending by industry. (That activity may sound remarkably dull and boring, but remember I read stuff like this so you don’t). I put this together this little table showing which industries invested the most in equipment and software in the years 2007-2011

News flash: The top industry for investment in equipment and software from 2007 to 2011 was broadcasting and telecommunications. In many ways, that’s not surprising, given the data-driven economy, but it’s good to see in black and white.

Healthcare would be number one by a small amount if we combined hospitals and ambulatory care services.

The Data Economy Is Much, Much Bigger Than You (and the Government) Think

Posted on by The Progressive Policy Institute

It’s become conventional wisdom among pundits that the tech and data boom is generating lots of wealth, but not much in the way of jobs or economic growth. The skeptics point to lack of job gains in the “information” sector, as defined by the Bureau of Labor Statistics, and to the country’s sub-2 percent GDP growth figures.

But as the U.S. shifts to a data-driven economy, the benefits of fixed and mobile broadband are showing up in ways that are not counted by traditional statistics. For just one example, take the number of jobs generated by the development and deployment of mobile apps. According to a new calculation by the Progressive Policy Institute, employment in the App Economy now comes to 752,000 jobs, up roughly 40% over the past year. This is a conservative estimate, based on tracking online help-wanted ads.

Auto companies are hiring software developers and testers to turn their vehicles into highly connected data platforms. Drugstores are going online to let their customers know when prescriptions are ready. Hospitals are ramping up their employment of clinical data managers to help handle the shift to electronic health records. Bed and breakfasts have shifted their entire booking operations online, driven by digital ads.

More broadly, demand for tech workers in the New York City region outstrips every other metro area, including San Francisco and San Jose, according to figures from The Conference Board. That reflects demand in finance, advertising, and media.

Read the full article here.