Investment in Broadband Critical to Job Creation

-Policy that deters investment would lead to significant job loss; impact unlikely to be offset by gains in other industries –

WASHINGTON – October 21, 2009 – Updated research shows that a decline in capital investments by the broadband services industry could eliminate jobs, the Internet Innovation Alliance (IIA) announced today.  An updated report by the Information Technology and Innovation Foundation (ITIF) and updated research conducted separately by former FCC Commissioner and economist Harold Furchtgott-Roth both illustrate the potential risks of changes in regulatory policy.

“In making policy decisions, it’s important to consider the possible risks, as well as the benefits,” said Co-Chairman of the Internet Innovation Alliance Bruce Mehlman.  “At IIA, we’ve long-focused on private investment to advance broadband.  Just as we’ve analyzed the job-creating impact of pro-investment policies, we think it’s important to quantify the possible risks at a time when economic recovery is at the top of our national agenda, because if investment goes down, jobs are lost.”

Mehlman also observed that despite differences in methodology, ITIF and Furchtgott-Roth reached strikingly similar conclusions. According to the new calculations:

  • A reduction in investment of just 2 percent by the broadband services industry would eliminate between 24,000 and 31,000 jobs, according to ITIF and Furchtgott-Roth. 
  • A reduction by 5 percent would eliminate between 47,000 and 78,000 jobs;
  • A 10 percent decline could be expected to eliminate more than 100,000 jobs according to both sets of research.

The broadband industry invests roughly $70 billion annually, of which a substantial share is on broadband.  Because broadband investments by this particular sector offer such robust employment effects per investment, even marginal declines in this sector’s investments could have substantial effects on employment.
Atkinson said that it would be difficult to offset declines in investment by the broadband services sector with new or increased investment from related industries such as software and online content providers, because these other sectors are simply not big enough.  According to U.S. Commerce Department data, the broadband services sector, which includes telecom, currently accounts for about 80 percent of the total annual investment made by the Information, Communications and Technology sector, which is estimated at 70 billion dollars.

“Broadband is a key component of digital infrastructure, and as such, increased investments have a positive effect on job creation; however, the pendulum swings both ways,” said Rob Atkinson with ITIF. “Restrictive regulations or uncertain market conditions could reduce investment, and hence employment.”

Furchtgott-Roth, who served on the FCC from 1997-2001, said that any new regulations must be well grounded to reduce the risk of decreased investment.  He said that spikes in investment in the mid-1990s were not sustained and were made largely as a result of poorly drawn regulations implementing the 1996 Telecommunications Act. 

“Reduced investment would lead to lower quality broadband services for many—if not all Americans in their homes, in their offices, in their schools, and in their healthcare centers.  For businesses and workers that compete in a global market, reduced broadband investment in America would lower their value in competitive markets.  Jobs that depend on the best available broadband services might migrate elsewhere,” said Furchtgott-Roth.

“It’s critical that the FCC take the time for careful analysis before enacting significant new regulation,” Atkinson said.  “Haste without analysis increases the chance of mistakes that will reduce investment and jobs.”

Mehlman co-founded the Internet Innovation Alliance in 2004.  The broad-based organization of for-profit innovators and not-for-profit community groups aims to ensure every American has access to broadband Internet regardless of race, income or geography.
To schedule a media interview with Bruce Mehlman, Harold Furchtgott-Roth or Rob Atkinson regarding this data, please contact:

Lauren DuBois
Sloane & Company:
310-359-2350
[email protected]

Methodology:

ITIF: To measure the impact of additional investment in broadband on direct, indirect and induced jobs, ITIF used a standard economics methodology. They determined the number of direct jobs created by using industry-specific data from the Bureau of Labor Statistics on employee compensation in the telecommunications and related computer and electronic equipment industries. We then calculated the number of indirect and induced jobs created using industry-level employment multipliers from the Bureau of Economic Analysis. Within the communication sector this employment multiplier equals 2.52, and within the manufacturing sector, the employment multiplier is 2.91. Finally, ITIF’s analysis anticipates an additional network multiplier effect of 1.17 through the creation of new industries.

Furchtgott-Roth: For those industries that provide broadband services to the public, the analyses are based on publicly available information from the federal government on capital expenditures, capital stocks and employment.  As capital available for investment in these industries falls, employment is assumed to fall commensurately.  A 5 percent decline in investment in these industries is assumed ultimately to lead to 5 percent decline in employment.

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About The Internet Innovation Alliance
The Internet Innovation Alliance (www.internetinnovation.org) is a broad-based coalition of business and non-profit organizations that aims to ensure every American has access to broadband Internet regardless of race, income or geography. IIA supports U.S. leaders’ creation of a comprehensive National Broadband Strategy to complement market efforts to achieve universal broadband availability and adoption.

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