10% Reduction in U.S. Communications Investment Would Cost 300,000 Jobs, $100 Billion in Wages, Over 5 Years

The economic impact of Federal Communications Commission policies that depress capital investment in the U.S. telecom indusry by 10 percent would lead to job losses exceeding 300,000 over a five year period, a new economic analysis by the Phoenix Center for Advanced Legal and Economic Policy Studies estimates.

A 10-percent reduction in investment costs 130,000 information-sector jobs per year in the following five years, plus indirect jobs of about 198,000 over the same five-year period.

For each million dollars of investment, the Phoenix Center finds that 10 jobs are affected in the information sector and perhaps 24 jobs across the entire economy, about a 40-percent larger effect than found in most earlier studies.

Lost earnings over a five-year period for a 10-percent decline in investment could be $36 billion in the information sector and $100 billion for all affected jobs.

The study was conducted by T. Randolph Beard, Ph.D. Phoenix Center Senior Fellow and Auburn University Economics Professor, Phoenix Center Chief Economist Dr. George S. Ford and Phoenix Center Adjunct Fellow Professor Hyeongwoo Kim, of Auburn University.

read the study here

The Title II Broadband Credibility Gap: Can An Agency Trust Itself?

The problem with Title II regulation of broadband access is that it relies on a "promise" by regulators not to impose a wider range of traditional common carrier obligations on Internet service providers. This is part one of a three part series.

Here is part two:



Here is part three:

"Soaring Profits" for Broadband Access Providers?

The Phoenix Center says claims by proponents of increased Internet regulation are quite wrong in claiming that firms such as AT&T, Verizon, Sprint-Nextel, Qwest, Comcast, and Time Warner Cable are making "record profits," "substantial profits" or  "soaring profits" that justify further regulation.

Quite to the contrary, those firms are earning at lower rates than the average Standard & Poors 500 firms does, and have done so for the last five years.

The Phoenix Center found that the profitability of the larger broadband access service providers is generally equal to, or below average, for firms in the S&P 500. It would be more accurate to say that profits are "'typical," not "soaring or 'substantial.'

Conversely, content firms like Google and EBay are substantially more profitable than the access providers are,  implying that access providers are not benefiting as much as others in the Internet ecosystem from the surge in broadband adoption and use.

Across all measures of profitability, Google and Ebay are two-to-four times more profitable than the better performing broadband providers.

In fact, the Phoenix Center found that both Wal-Mart and Colgate-Palmolive have much higher profits than the large access providers.

FCC Chairman Julius Genachowski has issued a challenge to the industry for data-driven analysis," according to study co-author and Phoenix Center President Lawrence J. Spiwak. "Accordingly, parties calling for regulation need to present more than just hyperbole about 'soaring' profits -- they need to present facts."

"The evidence shows that BSP profitability is fairly typical of American industry, if not a little low" said study co-author and Phoenix Center Chief Economist George S. Ford, PhD. "Based on available evidence, regulatory intervention based on substantial profitability by large BSPs has no basis in fact."