Special Reports

As the Federal Communications Commission (FCC) continues its efforts to elaborate rules concerning net neutrality for Internet service in the U.S., it does so pursuant to Chairman Julius Genachowski’s mandate for a fact- and data- driven approach to information.

One area of significant discussion has been the potential economic and employment impacts these rules may have. This paper seeks to provide policymakers at the FCC with an empirical analysis of such impacts.

Key Findings

New network neutrality regulations proposed by the FCC could slow the growth of the broadband sector, potentially affecting as many as 1.5 million jobs, both union and non-union, by the end of the decade.

If the network neutrality regulations being considered by the FCC were implemented:

– Revenue growth in the broadband sector could slow by about one-sixth over the next decade;

– Broadband sector jobs lost could be expected to total 14,217 in 2011, growing to 342,065 jobs by 2020;

– Economy-wide, 65,404 jobs could be put in jeopardy in 2011, with the total economy wide impact growing to 1,452,943 jobs affected by 2020 due to reduced revenue growth in the broadband sector.

Mobile broadband is expected to be the source of most of the broadband growth over the next decade. Consequently, it would bear the largest share of the economic burden of network neutrality regulations. In 2008, mobile broadband lines accounted for only about one-quarter of all broadband lines, but would likely account for more than half of the economic losses over the coming decade if the proposed network neutrality regulations are put into place.

The possibility that such losses would be offset by gains in other parts of the Internet economy is remote. Notably, any dollar-for-dollar transfer of revenues from the broadband sector to the Internet content sector would be a net job loser because it takes significantly more spending on Internet content to create a U.S. job than it does to create one in the broadband sector.