issue: Telecom

Who Says Tech Innovation Moves Too Slowly?

Posted on by The Progressive Policy Institute

In his article for the July/August issue of the Washington Monthly, Barry Lynn correctly notes that the slow pace of technological progress in many fields could help explain many of the ills of today’s economy. That’s an absolutely key point. Faster, broader innovation could help create more jobs at higher pay, and help the United States escape the slow-growth trap.

But having identified the right field of battle, Lynn points his rhetorical guns at the wrong target. What’s worse, they are loaded with the wrong policy ammunition.

Lynn argues that technological stagnation is due to “a concentration of economic control that enables a few corporate bosses to manipulate technological advance entirely outside of any open and competitive marketplace.” Looking back to Franklin Delano Roosevelt and the New Deal, Lynn’s solution seems to be “stepped up antitrust enforcement with the forced licensing of key patents held by monopolistic enterprises.”

In the current day, Lynn’s prime examples of innovation-sapping monopolies are drawn from the tech industry. He spends some time on Monsanto and Pfizer, but he primarily focuses on tech companies such as Microsoft, Intel, Oracle and Google. Drawing the analogy with the 1911 antitrust case against Standard Oil, he notes that “it’s not hard to identify which corporations could be renamed Standard Operating System, Standard Semiconductor, Standard Enterprise Software, Standard Storage, and Standard Search.”

Unfortunately for Lynn’s analysis, the tech sector is the one part of the economy where innovation is proceeding at a breakneck pace. In particular, the introduction of the iPhone by Apple in 2007, followed by the release of the Android mobile operating system by Google, rapidly transformed the way that people in the U.S. and around the world do business and live their lives. Continue reading “Who Says Tech Innovation Moves Too Slowly?” →

Five Key Objectives for a Progressive Broadband Policy

Posted on by The Progressive Policy Institute

For many progressives, “getting the Internet right” means addressing what they see as undue market power in the provision of broadband and, even more so, the potential for the abuse of that market power, as the Internet is seen as a landmark tool for social and political empowerment. Crafting a progressive broadband agenda that protects consumers and allows for innovation is key to the future of broadband in America.

In my latest report, Shaping the Digital Age: A Progressive Broadband Agenda, I outlined a progressive broadband policy agenda that consists of five key objectives:

  1. We must close the “digital divide” by leveraging all platforms. Given the dispersed populations across the country we should integrate a cloud-based, wireless framework or a mixed system in which signal is taken over wirelines to hubs that serve wireless customers. But the idea that “it must be wired” has been dispelled by the rapid advance of wireless broadband.
  2. We must bring more spectrum—the “airwaves” that “fuel” wireless—to the market to alleviate the spectrum crunch. Greater use of auctions, encouraging spectrum sharing, and looking to the government to give up its unused spectrum are all possibilities.
  3. We must explore “informating” key sectors of the economy. Broadband has the power to transform non-market sectors of the economy such as health, education and the environment. These entities will be driven by more than just market signals, and for that reason, we should look at positive programs to improve their performance.
  4. We must protect personal privacy. Movement within the broadband space invariably creates a trail of data. Progressives must honor rights of privacy in the digital age that and look at the role of transparency and choice in protecting consumers.
  5. We should examine the role of the Federal Communications Commission. The FCC labors under outdated law. While many of its missions—such as public safety—are legitimate, we should realistically evaluate limitations on its ability to deal with the real challenges of the digital age.

The fact that the Internet has become a driving force in shaping daily life doesn’t mean that it can’t be governed primarily by market forces. In fact, those forces have already delivered a competitive, innovative, and rapidly disseminating broadband network. There is a more appropriate policy agenda for progressives that would achieve important progressive goals in a way that “neutrality” and other regulatory forays cannot and will not.

To read the report, please visit https://www.progressivepolicy.org/2013/07/shaping-the-digital-age-a-progressive-broadband-agenda/

PPI Releases New Report on Broadband Policy

Posted on by The Progressive Policy Institute

New PPI Report by Ev Ehrlich Outlines Progressive Agenda for Broadband Policy

Economic and Consumer –focused Objectives Key to Progressive Broadband Agenda

WASHINGTON – The administration and Congress need to adopt a progressive broadband policy agenda that balances respect for the private investment that has built the nation’s broadband infrastructure with the need to realize the Internet’s full promise as a form of social infrastructure, says a new report released today by the Progressive Policy Institute (PPI).

The report, Shaping the Digital Age: A Progressive Broadband Agenda, is authored by Ev Ehrlich, president of ESC Company and former Undersecretary of Commerce for economic affairs in the Clinton Administration and current PPI fellow.

According to Ehrlich, for many progressives, “getting the Internet right” means addressing what they see as undue market power in the provision of broadband and the potential for the abuse of that market power, as the Internet is seen as a landmark tool for social and political empowerment.

Ehrlich’s progressive broadband policy agenda consists of five key objectives:

  • Extending the combined wired/ wireline broadband network to all Americans;
  • Creating an active market for spectrum;
  • Using broadband to advance if not revolutionize key non-market sectors of the economy, particularly education, health care, environmental protection and government;
  • Protecting personal privacy in broadband-based interactions;
  • Defining the role of the FCC as a catalyst, honest broker and market enabler rather than a regulatory implementer

“The fact that the Internet has become a driving force in shaping daily life doesn’t mean that it can’t be governed primarily by market forces. In fact, those forces have already delivered a competitive, innovative, and rapidly disseminating broadband network,” said Ehrlich. “There is a more appropriate policy agenda for progressives that would achieve important progressive goals in a way that “neutrality” and other regulatory forays cannot and will not.”

“Ev Ehrlich is a leading progressive economist and a key architect of the policies that nurtured the Internet’s early development,” said Will Marshall, president PPI. “In this trenchant new analysis, he urges progressives to stop fighting old regulatory battles, and instead champion a forward-looking agenda for ubiquitous, high-speed broadband as a tool for social empowerment as well as economic innovation and growth.”

 

Shaping the Digital Age: A Progressive Broadband Agenda

Posted on by The Progressive Policy Institute

The broadband Internet is an epochal technology. It is transforming the economy and changing the nature of everyday life. Its construction and development requires large quantities of resources, and its existence generates substantial innovation and economic growth.

What is the public sector’s best policy approach to this burgeoning phenomenon? Views differ across the political spectrum. The conservative vision of policy regarding the Internet is to leave it alone. Progressives find that view wanting, but what is their corresponding vision?

The answer is unclear. To some advocates, it involves an aggressive regulatory stance, whether in the form of “net neutrality,” “common carriage,” limitations on the sale of spectrum, or other policies that limit that latitude and operations of the companies that build and manage broadband networks. The most recent example of this type of advocacy is Susan Crawford’s Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age. To others, this agenda seems excessive, but plays to an innate skepticism about large (and older) companies in general–particularly when contrasted to such new corporate Goliaths as Apple, Google, or Facebook, which have made their fortunes by existing on the Internet, rather than by providing it.

What should the progressive agenda be? Are our choices either to embrace this aggressive regulatory agenda or to accede to conservative laissez-faire? This essay argues that there is a third, and far more promising, option for such a progressive broadband policy agenda. It balances respect for the private investment that has built the nation’s broadband infrastructure with the need to realize the Internet’s full promise as a form of social infrastructure and a tool for individual empowerment. It turns away from problems we may reasonably fear but that simply do not exist–most importantly, the idea that the provision of broadband services is dominated by an anti-competitive “duopoly” that stifles the broad dissemination of content. And it forthrightly addresses the new ones–such as the need to create mechanisms to develop broadband as a ubiquitous social asset, to create institutions that do not second-guess its unpredictable and burgeoning growth, and to protect consumer privacy and users’ right to control the use of their personal information.

This paper consists of three sections. The first discusses what progressives should want from the Internet, the second examines the true state of competition in the broadband sector, and the third lays out a progressive agenda.

Download the entire report.

The Great Disrupters of Silicon Valley

Posted on by The Progressive Policy Institute

Last week, the Pepperdine School of Public Policy gathered an eclectic crew of economists (including your fearless blogger) and high-tech entrepreneurs to discuss tech policy over dinner in Silicon Valley. Among the entrepreneurs were startups like mobile-payment company Ribbon, voice-recognition-software maker Promptu, and mobile-platform provider Appallicious, as well as established players like portable-device maker Lab126 (think Kindle).

These entrepreneurs shared stories about spontaneous collaborations being struck over morning coffee at University Cafe. (Note to joggers: After taking out University Avenue on day one of your trip, make sure to hit the Dish near Stanford on day two.) To succeed here, one needed to tap into this vibe. Unlike the keep-your-head-down mentality of Washingtonians, strangers in the Silicon Valley are inclined to interact based on a common mission to design the next great thing.

After being plied with a local Cabernet (or three), and without any prior warning, the economists were asked a difficult question: What role, if any, does tech policy have in promoting startups like the ones gathered around the table? Continue reading “The Great Disrupters of Silicon Valley” →

Critical Progress on Wireless Broadband

Posted on by The Progressive Policy Institute

The wireless broadband revolution can only be fully realized if the government implements policies that encourage continued investment and innovation in mobile broadband. Happily, last week saw critical progress by the government in the right direction.

On Friday President Obama released a Memorandum, titled “Expanding America’s Leadership in Wireless Innovation,” which calls on federal agencies to free up or share unused spectrum for commercial purposes. This Presidential Memorandum comes on the one year anniversary of President Obama’s last broadband executive order, which focused on using federal land to increase national broadband access.

This latest memorandum is a big step forward for enabling wireless broadband providers to meet rapidly expanding consumer demand for spectrum, and for reaching the goals set out in the 2010 National Broadband Agenda. As the number of smartphone subscribers increased 99 percent in the last two years, now reaching over half of the U.S. population, mobile broadband providers are in danger of reaching capacity with their current spectrum allotments.

Continue reading “Critical Progress on Wireless Broadband” →

Wireless Competition Under the Senate’s Microscope

Posted on by The Progressive Policy Institute

Today the Senate will convene a distinguished panel of experts to discuss the state of wireless competition in America. Although it is trendy among the cognoscenti to complain about the wireless industry, the reality is that wireless competition is vibrant here, and U.S. carriers are leaving their European counterparts in the dust.

A common refrain among those calling for regulators to “level the playing field” is that two carriers—AT&T and Verizon—are running away from the pack, due to their allegedly superior spectrum holdings. The resulting imbalance in competition can be remedied, they claim, by capping the spectrum holdings of the larger carriers and steering newly available spectrum to smaller carriers. Any relative improvement in the smaller carriers’ networks would attract more customers, which would reduce wireless concentration.

One problem with this story is that wireless concentration—a very fuzzy indicator of competition when it comes to wireless services—is not climbing as predicted. In fact, U.S. wireless concentration as measured by the FCC has held steady since 2008, indicating that Sprint and T-Mobile are not losing ground. Indeed, 2012 was a particularly good year for these carriers, as both enjoyed significant subscriber gains. T-Mobile recently completed its merger with MetroPCS, giving the combined company access to more subscribers and more spectrum.

Perhaps the best indicator of the smaller carriers’ prospects is the bidding war for Sprint that has erupted between Softbank and Dish Network. If Sprint stood no chance to compete with AT&T and Verizon due to its allegedly inferior spectrum, then these savvy investors would not be so bullish about Sprint’s future. Put differently, Sprint’s spectrum holdings are valued dearly in the marketplace despite their “high-frequency” nature.

Read the remainder of the article at Forbes.

How the FCC Could Shape a Mobile Data-Driven Economy

Posted on by The Progressive Policy Institute

Tom Wheeler, President Obama’s nominee to be the next chairman of the Federal Communications Commission (FCC), has a critical choice to make if he is confirmed by the Senate. The direction he takes with mobile broadband regulation will set the future pace of U.S. growth and innovation. It also will have major implications for government at all levels, on issues ranging from public-safety communications to rural health care to economic development.

If confirmed, Wheeler would come to the FCC at a critical juncture: The agency is at a regulatory fork in the road. For three years in a row, the FCC has been unable to conclude, in its annual mobile competition report, whether or not the mobile phone market is competitive. This is not simply a technical issue. Rather, it highlights an internal debate: The FCC can’t decide what regulatory framework to apply to the mobile broadband market and, by extension, to the entire digital network.

Continue reading at Governing HERE.

The Google Way: How Washington Can Regulate Without Killing Growth

Posted on by The Progressive Policy Institute

In the Atlantic, Michael Mandel explains how the Federal Trade Commission’s looming antitrust settlement with the search giant shows that regulators can do their job without stifling innovation:

The Federal Trade Commission seems ready to announce a settlement with Google today, bringing to a close a 20-month antitrust investigation. The settlement reportedly would avoid antitrust charges against the search giant, while requiring Google to agreeing to change some of the practices that other companies have complained about.

On its own, the settlement is good news for consumers, workers, and the whole U.S. economy. Objectionable conduct would be moderated without dampening the incentive for Google to innovate and provide new services. It’s also true that it never made much sense to attack one of America’s prime innovative companies at a time when competitiveness, growth, and job creation are at the top of the economic agenda.

More importantly, the FTC’s approach to the Google investigation shows that regulatory agencies can be thoughtful about adopting pro-innovation, pro-growth policies without abandoning their core missions. A critical question facing the U.S. economy–and indeed, the European economy as well–is whether the existing regulatory structure is flexible enough to deal with the fast changing world of technology. If regulators apply old rules too strictly, they run the risk of squashing the very innovation needed to drive growth, job creation, and competitiveness.

Read the complete piece at the Atlantic.

Tech Investment Still Rising, Despite WSJ Story

Posted on by The Progressive Policy Institute

This morning the WSJ ran a story entitled “Investment Falls Off a Cliff: U.S. Companies Cut Spending Plans Amid Fiscal and Economic Uncertainty.” The story argued that:

Nationwide, business investment in equipment and software—a measure of economic vitality in the corporate sector—stalled in the third quarter for the first time since early 2009.

It’s worth noting, however, that tech investment rose in the third quarter to its highest level on record. The chart below shows real investment in computers, software, and communications gear, in millions of 2005 dollars

 

The chart is based on BEA data. Please note that there was a pause in tech investment, but it came in the second quarter, not the third.

 

The way to interpret this chart is that we are in the middle of a data-driven boom. Companies view investment in data and data-related equipment as absolutely essential, and continue to spend, fiscal cliff or no.

This piece was cross-posted from Innovation and Growth.

Conference Report – The Rise of the Data-Driven Economy: Implications for Growth and Policy

Posted on by The Progressive Policy Institute

On October 10-12, 2012, the Progressive Policy Institute joined forces with John Cabot University in Rome to highlight the transformative potential of rise of data-driven economic innovation and growth. Hosted by John Cabot in collaboration with the Guarini Institute, the European Privacy Association and the Center for European Policy Studies, the transatlantic dialogue brought together representatives of leading U.S. technology companies and European Union officials, as well as analysts and experts from think tanks, non-profit organizations and academia.

Entitled The Rise of the Data-Driven Economy: Implications for Growth and Policy, the discussion centered on the increasing contribution of data-driven activity to economic growth in the United States and Europe; the European Union’s controversial data protection regulation; the responsibility of companies to build trust by being “ethical stewards” of their customers’ data; and, political threats to an open and free Internet.

Conference Speakers: Rita Balogh, Senior Associate, APCO; Michael Mandel, Chief Economic Strategist, Progressive Policy Institute; Jacques Bughin, Director, McKinsey Global Institute; Anthony House, Manager of Public Policy, Google; Roberto Masiero, President, THINK! The Innovation Knowledge Foundation; Pietro Paganini, Managing Director, European Privacy Association; Pat Walshe, Director of Privacy, GSM Association; Luca Bolognini, President, Italian Institute for Privacy; Ed Black, President & CEO, CCIA; Daniele Pica, Professor, John Cabot University; Megan Richards, Director, DG Connect; Chris Kelly, Kelly Investments; Michael Kende, Co-Head of the Regulation Sector, Analysys Mason; Dimitrios Droutsas, Member of European Parliament; Carolyn Nguyen, Director of Technology Policy, Microsoft; Dr. Thierry Vissol, Special Adviser, DG COMM Media & Communication; Paul W. Taylor, Governing Magazine; Laura Fennell, General Counsel, Intuit; Giuseppe Conte, Professor of Law, University of Florence; Maurice Fitzgerald, VP Strategy–Autonomy, Hewlett-Packard

Download the conference report.

AT&T’s Investment Challenge to Corporate America

Posted on by The Progressive Policy Institute

The economy is improving, but the U.S. is still struggling with an investment drought. Capital spending by business is 26% below the long-term trend, and has not yet recovered to pre-recession levels. By comparison, personal consumption has topped its pre-recession levels, and is much closer to the long-term trend.

Against that backdrop, it is notable that  AT&T announced yesterday that it  expected  a capital spending budget of $22 billion per year for the next three years. To put this in perspective, the *entire* motor vehicle industry invested less than $20 billion  in the United States in 2011.

In some ways, AT&T’s willingness to make a public announcement of a capital spending target three years out is a challenge to Corporate America (though the company certainly does not frame it this way). By making this public statement,  AT&T is effectively saying that it believes in the communications revolution, data-driven growth,  and the strength of the U.S. economy.

Why can’t other companies make the same sort of public announcement of  long-term capital spending goals and offer additional certainty to the still recovering U.S. economy? Truthfully, growth is suffering more from investment uncertainty than from regulatory uncertainty. If large companies pledged to maintain or increase domestic capital spending over the next three years, it would go a long way to boosting economic and job growth.

With the election now over, the Obama Administration should hold up AT&T–and other companies willing to invest in America–as examples of what to do right. If Obama wants a high-growth economy with prosperity for all, he needs to encourage more companies to make the same kind of bet on America’s future.

This piece was cross-posted from Innovation and Growth.

The Astonishing Obama Tech Boom

Posted on by The Progressive Policy Institute

Going into the next two debates, Barack Obama would certainly like a bit more of Bill Clinton’s mojo. After all, Clinton both won a second term and presided over the Internet-driven New Economy boom of the late 1990s, which created millions of jobs and eliminated the budget deficit. These are achievements that Obama would dearly love to duplicate.

Yet, Obama has been surprisingly unwilling to take credit for the most powerful economic success story on his watch: The astounding growth of the communications/internet sector, including smartphone makers, app developers, internet companies, and wireless providers.

Here are some figures:

• Over the past four years, the internet publishing, search and social media industry has been the top industry in job growth, with a 44% gain in domestic employment.

• Tech has beaten motor vehicles as a source of job growth. Since Obama took office in January 2009, the motor vehicles and parts industry created 94,000 jobs. By comparison, the key tech industries of software, online retailing, and internet publishing, search and social media have created 98,000 additional jobs since Obama’s inauguration. Custom computer programming–much of which involves the internet or mobile–accounts for another 91,000 new jobs over the same period.

• The so-called App Economy includes more than 500,000 jobs, up from none in 2007. These figures, based on an analysis of The Conference Board’s database of help-wanted ads, include the tech jobs that involve developing and maintaining mobile apps; the non-tech jobs that support app developers; and a conservative estimate of local spillover jobs.

• The real growth rate of gross domestic product is about a half percentage point higher than the official numbers show, once we take into account the enormous increase in data use by consumers.

Read the entire article at the Atlantic.

Photo credit: spirit of america / Shutterstock.com

PPI Unveils New Study, Rome Conference on The Data-Driven Economy”

Posted on by The Progressive Policy Institute

NEWS RELEASE 
FOR IMMEDIATE RELEASE

CONTACT:
Steven Chlapecka – schlapecka@ppionline.org, T: 202.525.3931

WASHINGTON—Government statistics don’t show it, but the production and consumption of data is the leading edge of economic growth in the United States, says a new report released today by the Progressive Policy Institute (PPI).

The report, Beyond Goods and Services: The (Unmeasured) Rise of the Data-Driven Economy, is by Dr. Michael Mandel, PPI’s Chief Economic Strategist and a senior fellow at the Wharton’s Mack Center for Technological Innovation. It was prepared for a transatlantic conference in Rome on Oct. 11-12 organized by PPI and John Cabot University.

Government statistical agencies, notes Mandel, traditionally divide economic activity into two categories: goods and services. Data, however, is neither a good or service:

Data is intangible, like a service, but can be easily stored and delivered far from its original production point, like a good. What’s more, the statistical techniques that have been traditionally used to track goods and services don’t work well for data-driven economic activities. The implication is that the key statistics watched by policy makers – economic growth, consumption, investment and trade – dramatically understate the importance of data for the economy. In turn, these misleading statistics distort government policy.

To remedy this problem, Mandel proposes that data be added as a primary economic category alongside goods and services. After adjusting government figures to account for unmeasured data consumption, Mandel estimates that real U.S. GDP rose at a 2.3 percent rate in the first half of 2012, compared to the official rate of 1.7 percent.

Next week’s Rome conference, The Rise of the Data-Driven Economy: Implications for Growth and Policy, brings together two dozen representatives of U.S. and European companies, officials of the European Union and Parliament, and academic experts. The forum will highlight the contribution of data-driven growth to the economies of Europe as well the United States; examine the potential impact of new European Union rules on data regulation and privacy on cross-border data flows; and, explore broader Internet governance questions that will on the agenda in December’s meeting of the World Conference on International Telecommunications (WCIT) in Dubai.

Leading representatives of U.S. Internet and telecommunications firms will also be hand to discuss corporate responsibility for empowering customers to protect their privacy and being ethical stewards of data. These include Laura Fennell, General Counsel of Intuit; Maurice Fitzgerald, Vice President of Strategy-Autonomy of Hewlett-Packard; Carolyn Nuygen, Technology Policy Strategist of Microsoft; Anthony House, Manager of Public Policy for Europe, the Middle East and Africa at Google; and Ed Black, President and CEO of the Computer and Communications Industry Association.

The Progressive Policy Institute is an independent, innovative and high-impact D.C.-based think tank founded in 1989. As the original “idea mill” for President Bill Clinton’s New Democrats, PPI has a long legacy of promoting break-the-mold ideas aimed at economic growth, national security and modern, performance-based government. Today, PPI’s unique mix of political realism and policy innovation continues to make it a leading source of pragmatic and creative ideas.

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Beyond Goods and Services: The (Unmeasured) Rise of the Data-Driven Economy

Posted on by The Progressive Policy Institute

INTRODUCTION
We live in a world where ‘data-driven economic activities’—the production, distribution and use of digital information of all types—are the leading edge of economic growth. Mobile broadband, increasingly available even in poor countries, is fostering a fundamental technological and social transformation.  Big data—the storage, manipulation, and analysis of huge data sets—is changing the way that businesses and governments make decisions.  And torrents of data ceaselessly flow back and forth across national borders, keeping the global economy linked.

Yet paradoxically, economic and regulatory policymakers around the world are not getting the data they need to understand the importance of data for the economy. Consider this: The Bureau of Economic Analysis, the U.S. agency which estimates economic growth, will tell you how much Americans increased their consumption of jewelry and watches in 2011, but offers no information about the growing use of mobile apps or online tax preparation programs.  Eurostat, the European statistical agency, reports how much European businesses invested in buildings and equipment in 2010, but not how much those same businesses spent on consumer or business databases. And the World Trade Organization publishes figures on the flow of clothing from Asia to the United States, but no official agency tracks the very valuable flow of data back and forth across the Pacific.

The problem is that data-driven economic activities do not fit naturally into the traditional economic categories.  Since the modern concept of economic growth was developed in the 1930s, economists have been systematically trained to think of the economy is being divided into two big categories: ‘Goods’ and ‘services’.

Goods are physical commodities, like clothes and steel beams, while services include everything else from healthcare to accounting to haircuts to restaurants. Goods are tangible and can be easily stored for future use, while services are intangible, and cannot be stockpiled for future use.   In theory, a statistician could estimate the output of a country by counting the number of cars and the bushels of corns coming out of the country’s factories and farms, and by watching workers in the service sector and counting the number of haircuts performed and the number of meals served.

But data is neither a good or service. Data is intangible, like a service, but can easily be stored and delivered far from its original production point, like a good. What’s more, the statistical techniques that have been traditionally used to track goods and services don’t work well for data-driven economic activities.  The implication is that the key statistics watched by policymakers—economic growth, consumption, investment, and trade—dramatically understate the importance of data for the economy.  In turn, these misleading statistics distort government policy.

SUMMARY
In this policy brief we will show that government economic statistics, stuck in the 20th century, are missing most of the data boom.  To remedy this problem, it is time to expand our economic statistics to add data as a primary economic category, just like goods and services.  Until we do this, policymakers and regulators won’t have the information they need to make good decisions.

This policy brief is organized around three major arguments:

  1. We explain why data is becoming important enough to get its own statistical category. Individuals can consume data, just like they can consume soda (a good) or haircuts (a service). Businesses can invest in databases, just like they invest in buildings and equipment.  And countries can export and import data, just like they export and import goods and services. As a result, instead of breaking down the economy into goods and services, statisticians need to be thinking about goods, services, and data. Adding data as a primary economic category can give policymakers a much more accurate picture of economic growth, consumption, investment, employment, and trade.
  2. We show how the official economic statistics dramatically undercount the growth of data-driven activities.  To give a real-life example, we focus on the consumption of data by Americans.  According to statistics from the Bureau of Economic Analysis, real consumption of ‘internet access’ has been falling since the second quarter of 2011.
  3. In other words, according to official U.S. government figures, consumer access to the Internet—including mobile—has been a drag on economic growth for the past year and a half.  This is simply absurd. As a result, the official statistics are missing such important trends as the increasing adoption of smartphones and tablets, the growth of mobile broadband, and the enormous surge of usage of services like Gmail, Dropbox, Facebook, and Twitter.
  4. We adjust the official U.S. statistics to account for unmeasured data consumption by individuals. Based on our estimates, we show that real GDP rose at a 2.3% rate in the first half of 2012, compared to the 1.7% official rate. In other words, the impact of the data-driven economy on overall economic growth is being substantially underestimated. Based on these figures, the growth in data consumption in the United States accounts for roughly one-quarter of adjusted GDP growth in the first half of 2012, making  data consumption by individuals is one of the largest contributors to U.S. economic growth in this period.
  5. We assess the link between economic growth and future government privacy and data regulatory policy in the 21st century data-driven economy Given that we have shown that data powers growth, correctly measured, we discuss the possibility that excessive privacy and data regulation can inadvertently harm future growth prospects.

To put it another way, restrictive and prescriptive regulation of the Internet and the movement and uses of data could have the effect not only of constraining Internet freedom but also Internet free trade.  Such regulation could become the trade barriers of the data-driven economy, “balkanizing” access to information and innovative data-driven products and services and constraining global economic growth. That’s a highly undesirable outcome for everyone.

Download the memo.

Photo credit: Shutterstock/photobank.kiev.ua