- The Washington Times - Tuesday, February 16, 2010

ANALYSIS/OPINION:

It’s hard to believe, but at a time when American workers are desperate for new jobs and Congress is trying to figure out something, anything, that will create some, one federal agency is moving toward new Internet regulations that would hamstring investment and job creation in one of our most vigorous industries. President Obama has proclaimed job creation to be our country’s top priority, but the Federal Communications Commission seems set on new Internet regulations that would do just the opposite. The FCC needs to think again.

At stake are so-called “net neutrality” regulations that would bar network operators from a variety of business offerings such as customizations to enhance the performance of services including Internet phone calls and video streaming that cannot afford even the smallest delays. Advocates say the rules are needed to keep network operators such as Comcast, Time Warner, Verizon and AT&T; from favoring one Web site or service over another. However, FCC policy principles already bar such favoritism, and it’s hard to identify a specific problem the regulations would fix.

But the negative consequences from the rules are easy to spot. By foreclosing business opportunities, the proposed rules would reduce growth potential, discourage new investment in network infrastructure and dampen network operators’ ability to sustain existing jobs or create new ones. Further, limiting expansion opportunities for the network companies would have the spillover effect of suppressing growth and job creation from subcontractors and suppliers to the operators. What’s more, the industries that would be hurt most by the proposed policies are among the U.S. economy’s most vigorous job creators.

A new study by the American Consumer Institute found, for example, that core network companies provide more than 2,300 jobs for every billion dollars of revenue - or nearly twice as many as the “edge” companies that use the networks to deliver their services but do not contribute to their creation or maintenance. What’s more, for every dollar of cash flow, the core network companies also pump twice the investment into the economy, compared to their non-network counterparts.

In terms of size, the top four Internet service providers averaged 170,000 workers and $12 billion in investment last year. In contrast, Google, the leading edge company, with a market capitalization bigger than any ISP, provided just 20,000 jobs and invested $2 billion annually. Services provided by Google and other edge companies greatly enhance our Internet experience and contribute to Americans’ quality of life, but when it comes to jobs, the network companies put at risk by pending network regulations contribute far more. Even smaller network companies such as Qwest and Cablevision outpace Google in this regard.

As companies announce layoffs and telecommunications providers wind down their traditional copper telephone networks for next-generation fiber broadband networks, it is urgent that public policies encourage investment and job creation in next-generation, fiber-based broadband services. Yet, because the FCC’s proposed regulations favor non-network companies at the expense of network companies, the result would be fewer jobs and less investment.

Policies that limit economic growth prospects bear a heavy burden of proof, especially at a time when the recession has cost millions of citizens their jobs and threatens their ability to provide their families’ most basic needs. Instead of proposing new regulations that would hamper some of America’s most vigorous job-creating companies, the FCC should be looking for policy options that would stimulate additional investment by network operators. Such an approach would be consistent with the president’s State of the Union declaration that “government can create the conditions necessary for businesses to expand and hire more workers.” It also would boost the national goal of broadband for every American, a goal that an FCC task force has said could require as much as $350 billion in additional private-sector investment.

Right now, America needs more jobs. That’s our country’s most important policy priority. The FCC should join the jobs campaign by putting aside proposed regulations and focusing on broadband policies that would encourage more investment by the companies that provide the jobs.

Steve Pociask is president of the American Consumer Institute.


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