Long-Term U.S. Productivity Growth and Mobile Broadband: The Road Ahead

12 Pages Posted: 24 Mar 2016 Last revised: 8 Aug 2016

Date Written: March 10, 2016

Abstract

This paper focuses on the potential of future wireless networks to support U.S. economic growth to 2030. We consider the economic implications of next generation wireless networks for long-term productivity growth and living standards, and relate those to current public policy questions. The result could be an acceleration of productivity growth in the physical industries that adds roughly $2.7 trillion (in 2015 dollars) to U.S. GDP by 2030. This translates into an 11 percent increase in economic output, which is equivalent to boosting the average annual growth rate by 0.7 percentage points. This paper makes three main points.

The United States is currently stuck in a slow-growth trap, which is holding down wages and living standards. We show that slow productivity growth today is correlated with the failure of “physical” industries such as manufacturing, health care, and construction to make good use of digital technologies, compared to “digital” industries such as professional services, finance, and entertainment. We estimate that physical industries, which make up roughly 80 percent of the private sector, account for only 35 percent of private infotech investment, and only 40 percent of telecom usage.

Using a top-down analysis, we suggest that successfully digitizing physical industries will require a vast increase in remote sensors and remote-controlled devices such as cars, drones, and construction equipment. True, in the short-run, machine-to-machine (M2M) wireless traffic will still only be a small portion of mobile data. Cisco forecasts that M2M wireless traffic in the United States, including wearables, will rise from 3 percent to 11 percent of all mobile data by 2020. In this paper, we further project that IoT-related M2M communications will account for roughly 35-47 percent of mobile data communications by 2030. To boost productivity of physical industries, M2M communications will occupy a much larger share of available bandwidth.

Achieving this level of connectivity and productivity improvement will require a sharp increase in the capacity of the nation’s mobile broadband networks. The nature of the capacity increase will depend on the development of technology. Using an analysis based on historical trends, we project that by 2030 it will be necessary to have over 1900 MHz of spectrum in the sub-mmW bands (3 times current availability) and at least 1.2 million cell sites (4 times current level) to fully enable the IoT-driven productivity gains in physical industries over the next fifteen years. By contrast, extensive use of mmW bands, if technologically and economically feasible, will require the deployment of a vast number of additional small cell sites that will require ongoing maintenance.

The conclusion: Creating vastly more wireless capacity is essential for getting the United States out of the slow-growth trap we are currently stuck in. In order to catalyze the next round of spectrum-enabled economic expansion, policymakers need to focus on freeing up multiples of the current amount of spectrum — both for licensed and unlicensed uses — while creating an economic environment in which it is profitable to build and maintain a greatly expanded number of cell sites.

Keywords: productivity, mobile, IoT, M2M

JEL Classification: D24, L96

Suggested Citation

Mandel, Michael, Long-Term U.S. Productivity Growth and Mobile Broadband: The Road Ahead (March 10, 2016). TPRC 44: The 44th Research Conference on Communication, Information and Internet Policy 2016. Available at SSRN: https://ssrn.com/abstract=2753356 or http://dx.doi.org/10.2139/ssrn.2753356

Michael Mandel (Contact Author)

Progressive Policy Institute ( email )

1200 New Hampshire NW
Suite 575
Washington, DC 20036
United States

HOME PAGE: http://www.progressivepolicy.org

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