Broadband Produces Employment

Many have assumed that broadband is good for the economy; now here's a study with rivets:

More specifically, for every one percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2 to 0.3 percent per year.

— The Effects of Broadband Deployment on Output and Employment: A Cross-sectional Analysis of U.S. Data, By Robert Crandall, William Lehr and Robert Litan, Brookings Institution, 2007

Of course, this is like saying every state in medieval Germany that had a printing press produced employment in the printing industry. There are economic and social effects far beyond mere employment. What should be done?

The paper has a few recommendations:

The surest route to lower prices is provided by increasing competition in the delivery of broadband services.

What else?

With respect to the supply side, the most important state policies involve incentives to build network capacity. Federal and state governments should actively seek to remove barriers to new infrastructure investment by incumbents and new entrants.

Well, that seems a bit conflicted with the previous point. What happened to competition? Wait, it does say "and new entrants."

But there's more:

The growth of Internet traffic, especially video traffic associated with such services as YouTube and file sharing traffic associated with a variety of P2P sharing applications, is straining current infrastructure. Providers will need to continue to invest substantially to meet this growing demand without quality-reducing congestion occurring. To understand the magnitude of the capacity challenge, consider that by itself, YouTube currently consumes as much bandwidth as the entire Internet required in 2000, while users upload 65,000 videos and download a staggering 100 million videos every day. 19 Service providers are now spending billions of dollars per year on expanding the Internet's carrying capacity and speed, in an effort to meet the challenges of rapidly growing demand and competitive pressures to continuously enhance the services offered. The virtuous cycle of capacity investments leading to new services and competition which in turn helps drive increased demand and traffic which in turn leads to still more investment in facilities risks being derailed if the firms investing in such infrastructure cannot reasonably expect to recover their economic costs, including earning a fair, riskadjusted return on investment. Regulatory rules which unduly restrain provider pricing and service offerings threaten carriers' ability to recover their costs and hence the viability of on-going investment in infrastructure. For example, certain states and members of Congress have proposed so-called "net neutrality" rules that would overly restrict carriers ability to offer differentiated services to address the needs of handling multimedia traffic and recovering the costs from meeting the diverse requirements of broadband consumers.

What about provider pricing and service offerings that unduly restrain new services like YouTube and file sharing applications? Not to mention VoIP, blogs, social networking like Facebook and MySpace, IM, mail, search engines, and plain old world wide web? And no more mention of "new entrants"; now it's just "Service providers are now speending" and "carriers". And, as we've seen, the incumbent service provider carriers are cherry picking, not really building out for the entire population. What the people want is the Internet, not broadband, for participation, not incumbent-provided content, and for everyone, not just those who happen to live in places where it's convenient for the incumbents to provide existing technology. This is a huge market opportunity. When will we get competitors who will see that opportunity and sell to it?

The paper does then recommend more commercially available radio spectrum to produce more competition. I'm for that, too. But that isn't going to be enough to compete with the entrenched duopoly, especially if there's no net neutrality to keep the duopoly from favoring (by pricing or throttling) its application services over competitors.

-jsq