Presentation of Dr. Michael Mandel, Progressive Policy Institute, to FCC Commissioner Gomez Open Internet Roundtable, 4/11/24
Thank you for the opportunity to contribute to this roundtable. I’m Michael Mandel, Chief Economist of the Progressive Policy Institute. The Progressive Policy Institute is a catalyst for policy innovation and political reform based in Washington, D.C. Our mission is to create radically pragmatic ideas to move America beyond ideological and partisan deadlock.
The Progressive Policy Institute believes in the importance of regulation in a well-functioning market economy. Unfortunately, the Commission’s proposed Safeguarding and Securing the Open Internet Order fails to offer an economically responsible path towards net neutrality.
Let’s step back and view the proposed Order in a larger perspective, There’s no doubt that the US economy has got plenty of long term problems that need to be addressed: Slow productivity growth, rising prices that eat away at living standards, a lack of investment in this country.
What’s odd about the proposed Order is that it is aimed at telecom, one of the best-performing sectors in the economy, measured by key economic variables such as productivity, investment, prices, and wages.
For example, from 2007 to 2022, “broadcasting and telecommunications” showed 6.4% annual productivity growth, making it the second-fastest industry in the whole economy.
By comparison, manufacturing productivity has risen at only an 0.1% rate since 2007, construction productivity has fallen at an 0.3% rate since 2007, and agricultural productivity has fallen at a stunning 0.5% rate.
It’s not surprising that the weakness in productivity in these stagnant industries has shown up in wages and prices as well. For example, between 2019 and 2023, prices in manufacturing rose at a 4.7% rate. Prices in construction rose at a 7.4% rate, and prices in agriculture rose at a more than 10% pace.
By comparison, prices in broadcasting and telecom fell at a 1.2% rate from 2019 to 2023.
The ordinary American is far more worried about the rising price of food and housing than the falling price of telecom services. Agricultural and construction workers are far more concerned about low pay and unsafe working conditions, as long as they have at least one broadband connection at home.
From this perspective, there is simply no evidence that additional broad regulation of the telecom industry is going to contribute to solving the major problems of ordinary Americans.
Instead, policymakers should focus on the interface between the successful telecom industry and lagging sectors. Why aren’t more construction sites and farms using 5G-enabled sensors to improve safety and lower costs? Is it a technology problem, a spectrum problem, or a regulatory problem?
Broadening the business use of 5G is a win-win-win proposition. It will boost productivity and lower prices in physical industries such as construction and agriculture. It will boost wages and improve safety for workers in these industries. And by broadening the cost base, it will lower broadband prices for consumers.
Nobody has a magic bullet for boosting productivity growth. But focusing policy on the lagging sectors seem more likely to pay off than tightening regulation of the high-performance telecom sector. For that reason, PPI strongly opposes the proposed Order and suggests that the FCC devote more scarce regulatory resources to improving the diffusion of telecom innovation to lagging sectors, to benefit consumers and workers.