Reforming Telecom Will Create Jobs

Published July 1, 2004

Currently, the United States ranks 11th in high-speed Internet use per capita, behind such countries as Italy and Canada. To make matters worse, American broadband speeds are slower than those in other countries. This sluggishness is due in large part to the poorly crafted regulations and harmful politicking that the nation’s telecom companies have been struggling under.

There is a clear link between increased broadband access and job creation. Not only would greater broadband penetration kick-start companies that provide tools for the networks, but if Americans want to compete with workers around the world, U.S. data must travel as fast as their data does. One place to start would be telecommunications reform.

Regulations stemming from the 1996 Telecommunications Act forced phone companies like the Bells to share their telecom infrastructure with their rivals at low, government-set prices. This scheme created a false “competition” that has hampered and distorted investment.

A casual observer of the telecom wars is often unsure which side of the debate promotes true competition and benefits for consumers. Even well-known small government advocate Grover Norquist, president of Americans for Tax Reform, fell prey to the mistaken argument that competition means allowing companies like AT&T to resell the Bells’ service at price-controlled rates.

True competition occurs when separate companies compete in the market with their own property and resources. It should be obvious that this is the proper understanding, but powerful lobbyists have been able to convince some legislators that the definition can be rewritten.

In a March 18 letter, 19 members of California’s congressional delegation, including Reps. Anna Eshoo and Mike Honda, whose districts take in Silicon Valley, told the Federal Communications Commission (FCC), “the Telecommunications Act passed by Congress in 1996 has been a success.” Perhaps not all of the Members clearly understood what they were signing, but Eshoo and Honda should know better.

Tech companies like Cisco Systems, Intel, and others are reeling under the madness of the 1996 act, and anyone who’s paid even scant attention to the monstrous litigation trail would hardly call it a success.

In March, the U.S. Court of Appeals for the D.C. Circuit handed down a welcome judgment rejecting the FCC’s effort to impose harmful “unbundling” rules to make competitors share their telecommunications infrastructure. On June 14, the U.S. Supreme Court declined to review the D.C. Court’s decision.

While strategists in the Republican and Democrat Presidential campaign camps no doubt are weighing the political pros and cons, the economic facts are clear. Already, government price controls on telecom are resulting in an annual decline in economic output equivalent to $101 per average household. According to a recent study by economists Robert Crandall and Hal Singer, the FCC’s rules destroy 1,300 jobs for every million telecommunications lines resold by a competitor.

To create more jobs and spur investment, regulatory barriers must be permanently removed, making it imperative that the D.C. Court’s decision remains in force. Widespread broadband deployment in California alone would create 170,000 new jobs in telecommunications and related fields, according to a new study by Wayne Brough, chief economist at Citizens for a Sound Economy.

It would also spur $90 billion in new economic output–a potential lifeline for states facing massive budget deficits and a glimmer of hope for workers in Silicon Valley and elsewhere who are worried about the economy and the outsourcing of jobs.

It’s time for policymakers, and the public that elects them, to pay attention and take action. In the lamentable “jobless” economic recovery, fixing the nation’s telecommunications mess will help create jobs.

Sonia Arrison ([email protected]) is director of technology studies at the Pacific Research Institute.