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5G wireless, fact and fiction

New wireless technologies, including 5G, are poised to expand the reach and robustness of mobile connectivity and boost broadband choices for tens of millions of consumers across the country. We’ve been talking about the potential of 5G the last few years, and now we are starting to see the reality. In a number of cities, thousands of small cells are going up on lampposts, utility poles, and building tops. I’ve discussed our own progress here in Indiana.

The project will take many years, but it’s happening. And the Federal Communications Commission just gave this massive infrastructure effort a lift by streamlining the rules for deploying these small cells. Because of the number of small cells to be deployed – many hundreds of thousands across the country – it would be counterproductive to treat each one of them as a new large structure, such as a building or hundred-foot cell tower. The new rules thus encourage fast deployment by smoothing the permitting process and making sure cities and states don’t charge excessive fees. The point is faster deployment of powerful new wireless networks, which will not only supercharge your smartphone but also provide a competitive alternative to traditional wired broadband.

Given this background, I found last week’s editorial by the mayor of San Jose, California, quite odd. Writing in the New York Times, Mayor Sam Liccardo argued that the new FCC rules to encourage faster deployment are an industry effort to “usurp control over these coveted public assets and utilize publicly owned streetlight poles for their own profit, not the public benefit.”

But the new streamlining rules do no such thing. Public rights of way will still be public. Cities and states will still have the same access as private firms, just as they had before. And who will benefit by the private investment of some $275 billion dollars in new wireless networks? That’s right – the public.

If cities and states wish to erect new Wi-Fi networks, as Mayor Liccardo did in San Jose, they can still do so.

I think the real complaint from some mayors is that the new FCC rules will limit their ability to extort wildly excessive fees and other payments from firms who want to bring these new wireless technologies to consumers. Too often, cities are blocking access to these rights of way, unless firms pay up. These government games are the very obstacles to deployment that the FCC rule is meant to fix.

Fewer obstacles, faster deployment. And accelerated deployment of the new 5G networks will mean broader coverage, faster speeds, and more broadband competition, which, crucially, will put downward pressure on connectivity prices, boosting broadband availability and affordability.

Mayor Liccardo emphasizes the challenges of low-income neighborhoods. But there are much better ways to help targeted communities than by trying to micromanage – and thus delay – network deployment. One better way, for example, might be to issue broadband vouchers or to encourage local non-profits to help pay for access.

This isn’t an either-or problem. Cities still maintain access to public rights of way. But one thing’s for sure. Private firms will be the primary builders of next generation networks. Overwhelmingly so. And faster deployment of wireless networks is good for the public.

This year’s Nobel for economics is a technology prize!

On Tuesday, the Royal Swedish Academy awarded the 2018 Nobel Prize in economic sciences to two American economists, William Nordhaus of Yale University and Paul Romer of New York University’s Stern School of Business. Romer is well-known for his work on innovation, and although the committee focused on Nordhaus’ research on climate change, this year’s prize is really all about technology and its central role in economic growth.

Paul Romer, who with William Nordhaus received the 2018 Nobel Prize in Economics, speaks at the New York University (NYU) Stern School of Business in New York City, October 8, 2018 – via REUTERS

Romer’s 1990 paper “Endogenous technological change” is one of the most famous and cited of the past several decades. Until then, the foundational theory of economic growth was Robert Solow’s model. It said growth was the result of varied quantities of capital and labor, which we could control, and a vague factor known as the Residual, which included scientific knowledge and technology. The Residual exposed a big limitation of the Solow model. Capital and labor were supposedly the heart of the model, and yet technology accounted for the vast bulk of growth — something like 85 percent, compared to the relatively small contributions of capital and labor. Furthermore, technology was an “exogenous” factor (outside our control) which didn’t seem to explain the real world. If technology was a free-floating ever-present factor, equally available across the world, why did some nations or regions do far better or worse than others? (more…)

Indiana, center of the 5G wireless world (at least for today)

About 18 months ago, wireless small cells started popping up all around Indianapolis. The one pictured above is about a half-mile from my house. In addition to these suburban versions, built by one large mobile carrier, a different mobile carrier built a network of 83 small cells in downtown Indy. These small cells are a key architectural facet of the next generation of wireless broadband, known as 5G, and over the next few years we’ll build hundreds of thousands of them across the country. This “densification” of mobile networks will expand coverage and massively boost speeds, responsiveness, and reliability. Our smartphones will of course benefit, but so will a whole range of other new devices and applications.

Building hundreds of thousands of these cells, however, will require lots of investment. A common estimate is $275 billion for the U.S. It will also require the cooperation of states and localities to speed the permitting to place these cells on lampposts, buildings, utility poles, and other rights of way. And this is where Indiana has led the way, with a decade’s worth of pro-broadband policy and, more recently, legislation that’s already encouraged the deployment of more than 1,000 small cells across the state.

Today, Brendan Carr, one of five commissioners of the Federal Communications Commission, visited Indiana to highlight our state’s early successes – and to lay out the next steps in the FCC’s program to expand 5G as quickly as possible. Carr described the key components of his plan, to be voted on at the Commission’s September 25 meeting. The prospective Order:

  1. Implements long-standing federal law that bars municipal rules that have the effect of prohibiting deployment of wireless service
  2. Allows municipalities to charge fees for reviewing small cell deployments when such fees are limited to recovering the municipalities’ costs, and provides guidance on specific fee levels that would comply with this standard
  3. Requires municipalities to approve or disapprove applications to attach small cells to existing structures within 60 days and applications to build new small cell poles within 90 days
  4. Places modest guardrails on other municipal rules that may prohibit service while reaffirming localities’ traditional roles in, for example, reasonable aesthetic reviews

Carr emphasized that this new framework, which will bar excessive fees, will help small towns and communities better compete for infrastructure and capital. We know that wireless firms have to build networks in large “must have” markets such as New York and San Francisco, where millions of Americans live and work. High fees and onerous permitting obstacles, however, are particularly hard on smaller communities – often discouraging investment in these non-urban geographies. This new framework, therefore, is yet another important component of closing the “digital divide.”

Here’s video of Carr’s talk at the Statehouse.

Energy Market of 2030: The End of Carbon Fuels?

See our contribution, with 15 others, to an International Economy symposium looking ahead to the energy market of 2030: The End of Carbon Fuels? Here was our contribution:

The dramatic reduction in U.S. carbon dioxide (CO2) emissions over the last decade is, paradoxically, the result of the massively increased use of a fossil fuel—natural gas. The shale technology revolution produced so much low-cost natural gas, and replaced so much coal, that U.S. emissions from electricity generation have fallen to levels not seen since the late 1980s.

Over time, electric vehicles—and later, autonomous ones—could reduce the need for oil. But natural gas will only rise in importance as the chief generator of inexpensive and reliable electricity.

The Energy Information Administration projects that fossil fuels will still represent 81 percent of total energy consumption in 2030. Natural gas, EIA estimates, will be the largest source of electricity, generating between 50 percent and 100 percent more than renewables.

Sure, but don’t technology revolutions often surprise even the smartest prognosticators? Renewables have indeed been growing from a tiny base, and some believe solar power is poised for miraculous gains.

Despite real advances in solar power and battery storage, however, these technologies don’t follow a Moore’s law path. Solar will grow, but we won’t solve solar’s (nor wind’s) fundamental intermittency and thus unreliability challenges by 2030. Nor can we avoid their voracious appetite for the earth’s surface, a fundamental scarcity which environmentalists and conservationists of all stripes should hope to preserve. Amazon’s Jeff Bezos even dreams of a day when we move much heavy industry into space to preserve the earth’s surface for human enjoyment.

But shouldn’t we pay extra in land area (and dollars) today to avoid CO2’s climate effects tomorrow? Fear not. The latest estimates of the climate’s CO2 sensitivity suggest any warming over the next century will be just half of previous estimates and, therefore, a net benefit to humanity and the earth. Satellites show us that CO2 greens the planet.

Economic growth is the most humane policy today, and it opens up frontiers of innovation, including new energy technologies. Premature anti-CO2 policies can actually boost CO2 emissions, as happened in Germany, where ill-advised wind and solar mandates (and also nuclear decommissionings) so decimated the energy grid that the nation had to quickly build new coal plants. New nuclear technologies are technologically superior to solar and wind but remain irrationally unpopular politically. Emitting more CO2 today may thus accelerate the date when economical, non-CO2 emitting technologies generate most of our power.

What a coincidence! Maybe better policy can lead to faster growth.

It’s fascinating to see those commentators and economists, who insisted for nearly a decade that 2% was the best the U.S. could do, grapple with the apparent uptick in economic growth and improving labor markets. Secular stagnation, technological stagnation, financial recessions are different, better get used to the “new normal” – these were the explanations (excuses?) for the failure of the economy to recover from the Panic of 2008. Millions of Americans had permanently dropped out of the labor market, robots were taking their jobs, or (paradoxically) technology was impotent, an aging population meant the U.S. would never grow faster than 2% again, and a global dearth of demand meant the economy would be stuck for many years to come. Wages for most workers weren’t growing, and inequality increased because of monopolies or greed or . . . whatever – anything but a failure of policy to encourage growth. Only bigger government could restart the stagnating secular engine, but even then, don’t expect too much.

All of the sudden, however, we’re hearing stories of tight labor markets, and 2017 will likely exhibit the fastest growth for a calendar year since 2006. We think there are three key reasons for the 2017 uptick: (1) an abrupt cessation of the anti-growth policy avalanche; (2) dramatic policy improvements, such as wide-ranging regulatory reforms and a major tax overhaul; and (3) the beginnings of a tech-led productivity freshening.

As Adam Ozimek (@ModeledBehavior) writes:

It’s refreshing to hear a mainstream economist call out the massive failure of the last decade – a devastating “growth gap” that we’ve been railing against for many years (also, e.g., Beyond the New NormalTechnology and the Growth Imperative; Uncage the Economy; etc.). It’s more than a little odd, however, that Ozimek singles out for criticism several economists who were arguing that the economy could have been growing much faster, if we’d let it, and were suggesting policies that could help boost employment. Shouldn’t he specifically call out the stagnation apologists instead? Isn’t the “giant mistake,” as Ozimek calls it, the insistence the economy was growing as fast as possible and the arguments that diverted attention from bad policy, unnecessarily slow growth, stagnating wages, and a huge drop in employment?

Growth Gap - thru 3Q 2017

Many stagnationists are now searching for possible explanations for the nascent uptick. Some are looking toward a possible resurgence of technology and the idea that productivity growth might improve from its decade-long drop. Larry Summers says the apparent uptick is merely a “sugar high” that won’t last. But you can see many of the stagnationists labor to avoid any acknowledgement that better policy might be at the heart of economic improvement. (By the way, I’m thrilled that our tech-led “Productivity Boom” thesis is getting this attention. The recent converts, however, seem to say that a new tech-boom is now inevitable, when just months or weeks ago they said tech was over. I think the policy improvements of 2017 will accelerate technological innovation in many lagging sectors.)

It’s too early to know whether these encouraging signs are the beginning of a long-term growth acceleration. But it’s good to see lots of people finally acknowledge the depth of the growth gap and the higher innovative potential of the American economy.

Tax reform can boost technology, productivity . . . and pay

Our take, in The Hill, on the prospects for tax reform and its effects on investment, productivity, and wages.

Tax reform can boost technology, productivity and, yes, your wage

by Bret Swanson | The Hill | December 14, 2017

What’s the link between robots, artificial intelligence and tax reform? We’ve been debating whether new technologies can ignite a productivity resurgence or whether tech has lost its potency; whether increased productivity will benefit workers or eliminate jobs altogether.

Understanding these relationships can help show why tax reform might boost all three — technology, productivity, and pay.

One of the most serious anti-tax reform claims is that it won’t help the average worker. Investment, productivity and growth, this argument says, are accruing mostly to the fortunate few. So, even if we could boost those top-line metrics, we may not be doing much for the typical American. (more…)

Statement on “Restoring Internet Freedom”

Lots of people are asking what I think about today’s FCC vote to roll back the 2015 Title telephone regulations for the Internet, and restore the Internet as an “information service.” So here’s a summary of my view:

Restoring Internet Freedom - statement - Swanson - 12.14.17

“Net Neutrality and Antitrust,” a House committee hearing

On Wednesday, a House Judiciary subcommittee heard testimony on the potential for existing general-purpose antitrust, competition, and consumer protection laws to police the Internet. Until the Federal Communications Commission (FCC) issued its 2015 Title II Order, the Federal Trade Commission (FTC) oversaw these functions. The 2015 rule upended decades worth of successful policy, but now that the new FCC is likely to return the Internet to its original status as a Title I information service, Title II advocates are warning that general purpose law and the FTC are not equipped to deal with the Internet. They’re also hoping that individual states enter the Internet regulation game. I think they are wrong on both counts.

In fact, it’s more important than ever that we govern the sprawling Internet with general purpose laws and economic principles, not the outdated, narrow, vertical silos of a 1934 monopoly telephone law. And certainly not a patchwork of conflicting state laws. The Internet is not just “modernized telephone wires.” It is a broad and deep ecosystem of communications and computing infrastructure; vast, nested layers of software, applications, and content; and increasingly varied services connecting increasingly diverse end-points and industries. General purpose rules are far better suited to this environment than the 80-year old law written to govern one network, built and operated by one company, to deliver one service.

Over the previous two decades of successful operation under Title I, telecom, cable, and mobile firms in the U.S. invested a total of $1.5 trillion in wired and wireless broadband networks. But over the last two years, since the Title II Order, the rate of investment has slowed. In 2014, the year before the Title II Order, U.S. broadband investment was $78.4 billion, but in 2016 that number had dropped by around 3%, to $76 billion. In the past, annual broadband investment had only dropped during recessions.

This is a concern because massive new investments are needed to fuel the next waves of Internet innovation. If we want to quickly and fully deploy new 5G wireless networks over the coming 15 years, for example, we need to extend fiber optic networks deeper into neighborhoods and more broadly across the nation in order to connect millions of new “small cells” that will not only deliver ever more video to our smartphones but also enable autonomous vehicles and the Internet of Things. It’s a project that may cost $250-300 billion, but it would happen far more slowly under Title II, and many marginal investments in marginal geographies might never happen at all.

At the hearing, FTC Commissioner Terrell McSweeny defended the 2015 Title II order, which poached many oversight functions from her own agency. Her reasoning was odd, however. She said that we needed to radically change policy in order to preserve the healthy results of previously successful policy. She said the Internet’s success depended on its openness, and we could sustain that openness only by applying the old telephone regulations, for the first time, to the Internet.

This gets things backwards. In our system, we usually intervene in markets and industries only if we demonstrate both serious and widespread market failures and if we think a policy can deliver clear improvements compared to its possible downside. In other words, the burden is on the government to prove harm and that it can better manage an industry. The demonstrable success of the Internet made this a tough task for the FCC. In the end, the FCC didn’t perform a market analysis, didn’t show market failures or consumer harm, didn’t show market power, and didn’t perform a cost-benefit analysis of its aggressive new policy. It simply asserted that it knew better how to manage the technology and business of the Internet, compared to engineers and entrepreneurs who had already created one of history’s biggest economic and technical successes.

Commissioner McSweeny also disavowed what had been one of the FTC’s most important new-economy functions and one in which it had developed a good bit of expertise – digital privacy. Under the Title II Order, the FCC snatched from the FTC the power to regulate Internet service providers (ISPs) on matters of digital privacy. Now that the FCC looks to be returning that power to the FTC, however, some states are attempting to regulate Internet privacy themselves. This summer, for example, California legislators tried to impose the Title II Order’s privacy rules on ISPs. Although that bill didn’t pass, you can bet California and other states will be back.

It’s important, therefore, that the FCC reaffirm longstanding U.S. policy – that the Internet is the ultimate form of interstate commerce. Here’s the way we put it in a recent post:

The internet blew apart the old ways of doing things. Internet access and applications are inherently nonlocal services. In this sense, the “cloud” analogy is useful. Telephones used to be registered to a physical street address. Today’s mobile devices go everywhere. Data, services, and apps are hosted in the cloud at multiple locations and serve end users who could be anywhere — likewise for peer-to-peer applications, which connect individual users who are mobile. Along most parameters, it makes no sense to govern the internet locally. Can you imagine 50 different laws governing digital privacy or net neutrality? It would be confusing at best, but more likely debilitating.

The Democratic FCC Chairman Bill Kennard weighed in on this matter in the late 1990s. He was in the middle of the original debate over broadband and argued firmly that high-speed cable modems were subject to a national policy of “unregulation” and should not be swept into the morass of legacy regulation.

In a 1999 speech, he admonished those who would seek to regulate broadband at the local or state level:

“Unfortunately, a number of local franchising authorities have decided not to follow this de-regulatory, pro-competitive approach. Instead, they have begun imposing their own local open access provisions. As I’ve said before, it is in the national interest that we have a national broadband policy. The FCC has the authority to set one, and we have. We have taken a de-regulatory approach, an approach that will let this nascent industry flourish. Disturbed by the effect that the actions of local franchising authorities could have on this policy and on the deployment of broadband, I have asked our general counsel to prepare a brief to be filed in the pending Ninth Circuit case so we can explain to the court why it’s important that we have a national policy.”

In the coming months, the FCC will likely reclassify the internet as a Title I information service. In addition to freeing broadband and mobile from the regulatory straitjacket of the 2015 Title II Order, this will also return oversight responsibility for digital privacy to the Federal Trade Commission (FTC), its natural home. The FTC has spent the last decade developing rules governing this important and growing arena and has enforced those rules to protect consumers. States’ efforts to impose their own layer of possibly contradictory rules would only confuse consumers and discourage upstart innovators.

As the internet becomes an ever more important component of all that we do, as its complexity spreads, and as it touches more parts of the economy, this principle will only become more important. Yes, there will be legitimate debates over just where to draw the boundaries. As the internet seeps further into every economic and social act, this does not mean that states will lose all power to govern. But to the extent that Congress, the FCC, and the FTC have the authority to protect the free flow of internet activity against state-based obstacles and fragmentation, they should do so. In its coming order, the FCC should reaffirm the interstate nature of these services.

A return to the Internet’s original status as a Title I information service, protected from state-based fragmentation, merely extends and strengthens the foundation upon which the U.S. invented and built the modern information economy.

The $12-million iPhone

Several years ago, I had a bit of fun estimating how much an iPhone would have cost to make in the 1990s. The impetus was a story making the rounds on the web. A journalist had found a full-page newspaper ad from RadioShack dating back to 1991. He was rightly amazed that all 13 of the advertised electronic gadgets — computer, camcorder, answering machine, cordless phone, etc. — were now integrated into a single iPhone. The cost of those 13 gadgets, moreover, summed to more than $3,000. Wow, he enthused, most of us now hold $3,000 worth of electronics in the palm of our hand.

I saluted the writer’s general thrust but noted that he had wildly underestimated the true worth of our modern handheld computers. In fact, the computing power, data storage capacity, and communications bandwidth of an iPhone in 2014 would have cost at least $3 million back in 1991. He had underestimated the pace of advance by three orders of magnitude (or a factor of 1,000).

Well, in a recent podcast, our old friend Richard Bennett of High Tech Forum brought up the $3 million iPhone 5 from 2014, so I decided to update the estimate. For the new analysis, I applied the same method to my own iPhone 7, purchased in the fall of 2016 — 25 years after the 1991 RadioShack ad. continue reading . . .

Why productivity slowed . . . and why it’s about to soar.

I enjoyed discussing technology’s impact on growth and employment with David Beckworth and Michael Mandel on David’s Macro Musings podcast.

Full speed ahead on the internet

Here’s a brief statement on today’s action at the Federal Communications Commission, where the agency will begin a rule-making to reverse Title II regulation of the Internet and ask how best to protect its freedom and openness.

The Internet has always been open and free, and the successful results were clear for all to see. The imposition of Title II regulation on the Internet in 2015 was unnecessary, illegal, and foolish. Title II was a speed bump that, if allowed to remain, could have grown into a giant road-block to Internet innovation. Fortunately, Chairman Ajit Pai and the FCC today begin the process of returning to the simple rules that for decades fostered Internet investment and entrepreneurship and led to the historically successful digital economy.

The next waves of Internet innovation will bring the amazing power of the digital economy to the physical economy, promising widespread economic benefits. If we want to take the next step, to encourage infrastructure investment and innovation for decades to come, Congress could codify a pro-innovation, pro-consumer approach that would keep the Internet free and open without harmful bureaucratic control.

– Bret Swanson

Robots on TV

See brief interview on Fox Business this morning discussing our “Robots Will Save the Economy” op-ed from The Wall Street Journal.

Robots (and all kinds of info-tech) Will Save the Economy

Screen Shot 2017-05-15 at 9.57.05 AM

See our commentary, with Michael Mandel, in today’s Wall Street Journal: Robots Will Save the Economy.

Ajit Pai’s Welcome Return to Internet Innovation

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FCC Chairman Ajit Pai gives speech announcing new approach to Internet regulation, in Washington, D.C., April 26, 2017.

Here’s our latest in Forbes . . . Ajit Pai’s Welcome Return to Internet Innovation:

“Yesterday, Ajit Pai, the new Chairman of the Federal Communications Commission, announced a roll back of the Obama administration’s aggressive regulatory approach to the Internet, adopted in early 2015. This afternoon, Pai will release the text of the proposed rule-making, which will launch several months of public comment.

“In yesterday’s speech, Pai emphasized the Internet’s historic success, based on a bipartisan approach adopted in the Clinton administration, which elevated innovation over regulation by consciously rejecting the old telephone rules for the emerging digital economy:

Under this framework, a free and open Internet flourished. Under this framework, America’s Internet economy produced the world’s most successful online companies: Google, Facebook, and Netflix, just to name a few. Under this framework, the private sector invested about $1.5 trillion to build the networks that gave people high-speed access to the Internet. And under this framework, consumers benefited from unparalleled innovation. But two years ago, the federal government’s approach suddenly changed.

continue reading . . .

Dawn? Or doom? I vote dawn.

Here is video of a presentation from last October’s Dawn or Doom technology conference at Purdue University, where I previewed the Coming Productivity Boom research.

The Coming Productivity Boom: Transforming the Physical Economy with Information

We’re excited to share this new research, conducted with Michael Mandel, and commissioned by the Technology CEO Council. Here’s the Executive Summary:

Executive Summary

The Information Age is not over. It has barely begun.

●  The diffusion of information technology into the physical industries is poised to revive the economy, create jobs, and boost incomes. Far from nearing its end, the Information Age may give us its most powerful and widespread economic benefits in the years ahead. Aided by improved public policy focused on innovation, we project a significant acceleration of productivity across a wide array of industries, leading to more broad-based economic growth.

●  The 10-year productivity drought is almost over. The next waves of the information revolution—where we connect the physical world and infuse it with intelligence—are beginning to emerge. Increased use of mobile technologies, cloud services, artificial intelligence, big data, inexpensive and ubiquitous sensors, computer vision, virtual reality, robotics, 3D additive manufacturing, and a new generation of 5G wireless are on the verge of transforming the traditional physical industries—healthcare, transportation, energy, education, manufacturing, agriculture, retail, and urban travel services.

●  At 2.7%, productivity growth in the digital industries over the last 15 years has been strong.

●  On the other hand, productivity in the physical industries grew just 0.7% annually, leading to anemic economic growth over the last decade.

●  The digital industries, which account for around 25% of U S private-sector employment and 30% of private-sector GDP, make 70% of all private-sector investments in information technology. The physical industries, which are 75% of private-sector employment and 70% of private-sector GDP, make just 30% of the investments in information technology.

● This “information gap” is a key source of recent economic stagnation and the productivity paradox, where many workers seem not to have benefited from apparent rapid technological advances. Three-quarters of the private sector—the physical economy—is operating well below its potential, dragging down growth and capping living standards.

● In particular, the crucial manufacturing sector, outside the computer and electronics industry, has barely boosted its capital stock of IT equipment and software over the past 15 years. Not surprisingly, productivity growth in manufacturing has slowed to a crawl in recent years.

● Information technologies make existing processes more efficient. More importantly, however, creative deployment of IT empowers entirely new business models and processes, new products, services, and platforms. It promotes more competitive differentiation. The digital industries have embraced and benefited from scalable platforms, such as the Web and the smartphone, which sparked additional entrepreneurial explosions of variety and experimentation. The physical industries, by and large, have not. They have deployed comparatively little IT, and where they have done so, it has been focused on efficiency, not innovation and new scalable platforms. That’s about to change.

● Healthcare, energy, and transportation, for example, are evolving into information industries Smartphones and wearable devices will make healthcare delivery and data collection more effective and personal, while computational bioscience and customized molecular medicine will radically improve drug discovery and effectiveness. Artificial intelligence will assist doctors, and robots will increasingly be used for surgery and eldercare. The boom in American shale petroleum is largely an information technology phenomenon, and it’s just the beginning. Autonomous vehicles and smart traffic systems, meanwhile, will radically improve personal, public, and freight transportation in terms of both efficiency and safety, but they also will create new platforms upon which entirely new economic goods can be created.

● Manufacturing may be on the cusp of transformation—not just by robotics and 3D printing, but by the emergence of smart manufacturing more broadly: a fundamental rethinking of the production and design processes that substantially boost productivity and demand. That, in turn, could create a new set of manufacturing-related jobs and allow American factories to compete more effectively against low-wage rivals.

●  Far from a jobless future, a more productive physical economy will make American workers more valuable and employable. It also will free up resources to spend on new types of goods and services. Artificial intelligence and robots will not only perform many unpleasant and super-human tasks but also will complement our most human capabilities and make workers more productive than ever. Humans equipped with boundless information, machine intelligence, and robot strength will create many new types of jobs.

●  Employment growth in the digital sector has modestly outpaced employment growth in the physical sector, despite the big edge in productivity growth for digital industries. This suggests that we can both achieve higher living standards and create good new jobs. The notion that automation is the key enemy of jobs is wrong. Over the medium and long terms, productivity is good for employment.

●  How much could these IT-related investments add to economic growth? Our assessment, based on an analysis of recent history, suggests this transformation could boost annual economic growth by 0.7 percentage points over the next 15 years. That may not sound like much, but it would add $2.7 trillion to annual U.S. economic output by 2031, in 2016 dollars. Wages and salary payments to workers would increase by a cumulative $8.6 trillion over the next 15 years. Federal revenues over the period would grow by a cumulative $3.9 trillion, helping to pay for Social Security and Medicare. State and local revenues would rise by a cumulative $1.9 trillion, all without increasing the tax share of GDP.

● Expanding the information revolution to the physical industries will require an entrepreneurial mindset—in industry and in government—to deploy information technology in new ways and reorganize firms and sectors to exploit the power of IT. Some of these technological transformations are already underway. Public policy, however, will either retard or accelerate the diffusion of information into the physical industries. Better or worse policy will, in significant part, determine the rate at which more people enjoy the miraculous benefits of rapid innovation, both as workers and consumers.

● Better tax policy, for example, can encourage domestic investment and the allocation of capital into more cutting-edge projects and firms. Closing the information gap also will demand the ability of regulators in the physical industries—from the Food and Drug Administration to the Department of Transportation, and every agency in between—to embrace innovation and technological change. Mobilizing information to dramatically improve education and training is imperative if we want our citizens to fully leverage and benefit from these emerging opportunities. Encouraging investment in communications networks, which are the foundation of most of these new capabilities, is also a crucial priority. The free flow of capital, goods, services, and data around the world is as essential as ever to innovation and productivity.

● Launching this new productivity boom thus demands a new, pro-innovation focus of public policy.

Read the entire report.

Samsung seeks another patent victory at Supreme Court vs. Apple

After several decades when patents were handed out like candy, leading to a litigious free-for-all, the courts and Congress over the past few years have begun tightening the reins. This is important if we want intellectual property to promote real technological  innovation, rather than frivolous legal entrepreneurship.

Among the signs of progress, the Supreme Court in December 2016 ruled 8-0 for Samsung, reversing a large $300 million award to Apple. In my view, the Court made the right call that the 19th century law governing design patents, which concern the look and feel of products, was being misapplied in a modern smartphone world.

On the heels of its victory, Samsung is now asking the Supreme Court to look at another patent squabble with Apple. This case concerns substantive questions of patent validity and infringement and also an unusual procedural question – both of which could have important implications for IP law.

In this case, Apple initially prevailed 2-1 in its charge that Samsung infringed three patents, which we’ll call:

  1. a 1996 “quick links” patent with “analyzer server” (‘647);
  2. a “slide to unlock” patent (‘721); and
  3. an “autocorrect” patent (‘172)

Upon appeal, however, the Federal Circuit ruled 3-0 for Samsung – finding that patent 1. was not in fact infringed and that patents 2. and 3. are invalid because they are obvious.

Apple requested en banc review by the entire court, but the parties did not hear from the court for six months. Until, suddenly, an en banc order was issued overturning the 3-0 ruling, without any hearing, briefs, or notice. Normally, a court will first announce it has taken a case en banc (or not), and later issue an opinion. In patent cases especially, there is usually further briefing and often a hearing. Court watchers were thus surprised by the unusual procedure (or lack thereof). All three judges from the 3-0 decision dissented with gusto, questioning the en banc review’s substance and procedural irregularities.

Samsung is thus returning to the Supreme Court, petitioning for cert on March 10. Getting the High Court to hear your case is always hard. They only take a small minority of those who ask. And the Court just decided a case with the same two litigants in December. On the other hand, the Court has been keen to reform patent law over the past few years, and its 8-0 decision in December reveals a likeness of mind to further the “patent reformation,” as I’ve called it.  The High Court may want to clarify some of these utility patent questions like it did for design patents in the last case, as well as resolve the highly unusual en banc behavior, lest that court make it a habit. The strength of the three dissents by the 3-0 panel also makes it somewhat more likely they’ll take it.

In fact, FOSS Patents argues that

What’s ambitious about Samsung’s petition is that it raises three questions for review, covering the big three patent litigation questions:

·         validity (here, obviousness),

·         remedies (here, injunctive relief, which is always a more important issue than damages unless damages would really be devastating), and

·         infringement (here, whether all elements of the relevant “quick links” claim were infringed).

If the Supreme Court granted all three, it would be the most comprehensive patent case ever before the top U.S. court, and the implications of a decision could, collectively, go beyond Alice.

Thus, if the High Court really wants to extend its recent efforts to improve patent law, this might be the case to do it.

Can Indiana lead in the 5G economy?

5G integrated network, many applications and services“A revival of economic growth in the U.S. and around the world will, to a not insignificant degree, depend on the successful deployment of the next generation of wireless technology.

“The Internet’s first few chapters transformed entertainment, news, telephony, and finance — in other words, the existing electronic industries. Going forward, however, the wireless Internet will increasingly reach out to the rest of the economy and transform every industry, from transportation to education to health care.

“To drive and accommodate this cascading wireless boom, we will need wireless connections that are faster, greater in number, and more robust, widespread, diverse, and flexible. We will need a new fifth generation, or 5G, wireless infrastructure. 5G will be the foundation of not just the digital economy but increasingly of the physical economy as well.”

That’s how I began a recent column summarizing my research on the potential for technology to drive economic growth. 5G networks will not only provide an additional residential broadband option. 5G will also be the basis for the Internet of Things (IoT), connected cars and trucks, mobile and personalized digital health care, and next generation educational content and tools. The good news is that Indiana is already poised to lead in 5G. AT&T, for example, has announced that Indianapolis is one of two sites nationwide that will get a major 5G trial. And Verizon is already deploying “small cells” – a key component of 5G networks – across the metro area, including in my hometown of Zionsville (see photo).

Zville small cell 1

Small cell lamppost in Zionsville, Indiana.

If Indiana is to truly lead in 5G, and all the next generation services, however, it will need to take the next step. That means modest legislation that makes it as easy as possible to deploy these networks. Streamlining the permitting process for small cells will not only encourage investment and construction jobs as we string fiber optics and erect small cells. It will also mean Indiana will be among the first to enjoy the fast and ubiquitous connectivity that will be the foundation of nearly every industry going forward. In many ways, 5G is the economic development opportunity of the next decade.

There is legislation currently moving in the Indiana General Assembly that could propel Indiana along its already favorable 5G path. Sponsored by Sen. Brandt Hershman, SB 213 is a common sense and simple way to encourage investment in these networks, and the multitude of services that will follow.

The great news is that 5G is one of the few economic and Internet policy issues that enjoys widespread bipartisan support. The current FCC chairman Ajit Pai supports these streamlining polices, but so did the former Democratic chairman Tom Wheeler:

The nature of 5G technology doesn’t just mean more antenna sites, it also means that without such sites the benefits of 5G may be sharply diminished. In the pre-5G world, fending off sites from the immediate neighborhood didn’t necessarily mean sacrificing the advantages of obtaining service from a distant cell site. With the anticipated 5G architecture, that would appear to be less feasible, perhaps much less feasible.

I have no doubt other states will copy Indiana, once they see what we’ve done – or leap ahead of us, if we don’t embrace this opportunity.

Here are a few of our reports, articles, and podcasts on 5G:

Imagining the 5G Wireless Future: Apps, Devices, Networks, Spectrum – Entropy Economics report, November 2016

5G Wireless Is a Platform for Economic Revival – summary of report in The Hill, November 2016

5G and the Internet of Everything – podcast with TechFreedom, December 2016

Opening the 5G Wireless Frontier – article in Computerworld, July 2016

– Bret Swanson

 

How the Internet Will Become the ‘Exanet’

See our latest at Forbes: How the Internet Will Become the ‘Exanet’

Today’s Internet has transformed media and delivered prodigious value to consumers, in entertainment, ecommerce, and personal productivity.

Yet the next waves of the Internet will extend to new industries in the physical world, delivering a far greater variety of services and requiring connectivity that is even faster, more ubiquitous, and more robust than today. To drive and accommodate this information embrace by the real economy, we’ll need something bigger and better than the Internet. We’ll need the “exanet.”

In 2016, global Internet traffic likely topped 1,000 exabytes. A thousand exabytes equals one zettabyte (ZB), or a billion trillion (1021) bytes, which is roughly 114 million years of high-definition video. Over the last 20 years, since the dawn of the dot-com era in 1996, monthly Internet traffic has grown around 90 million-fold. continue reading . . .

A decade of subpar growth

Here’s a supplement to our previous post on economic growth scenarios, another way to look at the past decade.

A Decade of Subpar Growth 2006-16

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