Study: Net Neutrality Rules Would Cost Telecom Jobs

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Network neutrality rules adopted by the U.S. Federal Communications Commission could lead to the loss of more than 340,000 jobs in the broadband industry over the next 10 years, with few offsetting Web content jobs, according to a new study funded by a group opposed to the proposed rules.

If the FCC adopts the net neutrality rules it is now considering, close to 1.5 million jobs across the U.S. economy could be put in jeopardy by 2020, and revenue growth in the broadband industry would slow by about one-sixth during that time frame, said the study, by Coleman Bazelon, a telecom economist with The Brattle Group.

Bazelon predicted that spending in the broadband industry would decrease by US$5 billion in 2011 if the FCC passes formal net neutrality rules, with the number growing in subsequent years.

"The FCC should be careful in developing any net neutrality rules, to not undermine its own goals of promoting broadband and employment," Bazelon said during a press conference Friday.

Broadband Called Strong

Broadband deployment in the U.S. is a "success story," the study said. About 95 percent of U.S. residents have fixed broadband available, and 98 percent have 3G mobile broadband available, the study said.

Artwork: Chip Taylor
"Any change in the rules affecting broadband should be well-considered so as not to harm its future development," the study added.

The study is the latest of several weighing in on the economic impact of net neutrality rules, which are now being considered by the FCC. A study released in January by the Institute for Policy Integrity at the New York University School of Law suggested net neutrality rules would preserve the investments of Web content producers such as newspapers and bloggers. Just this Thursday, the Phoenix Center for Advanced Legal and Economic Public Policy Studies, a free-market think tank, released several studies questioning the economic benefits of net neutrality rules.

The mobile broadband industry would be hit particularly hard by net neutrality rules, said the new Brattle study, funded by the Mobile Future, a Washington, D.C., group advocating for pro-business mobile issues.

"Wireless would be disproportionately impacted, because it represents the majority of [broadband] growth over the next decade," Bazelon said.

The study also suggested that any Web content jobs that might be created with strong net neutrality rules wouldn't offset the losses in the broadband sector. Content jobs cost more to create than broadband jobs, meaning a direct transfer of profits from broadband to content would be a "net job loser," Bazelon said.

"Different content might be better under a net neutrality regulatory regime, but there's no theoretical reason to believe there will be more content or more valued content," Bazelon said. "The losses in the broadband sector are large, creating a large hurdle that the content sector would have to overcome."

Research Challenged

Net neutrality advocates questioned the Mobile Future study's results.

One of the major backers of Mobile Future is broadband provider AT&T, one of the most vocal opponents of net neutrality rules, said Andrew Jay Schwartzman, senior vice president and policy director of the Media Access Project, a media reform advocacy group.

"Judging by the press release, Coleman Bazelon has delivered a predictable outcome," Schwartzman said.

The study ignores large telecom profits in recent years, when AT&T was required by federal regulators to accept net neutrality rules as part of its merger with BellSouth, said Derek Turner, research director with Free Press, also a media reform group.

"This industry-funded research is based on deeply flawed assumptions, and amount to nothing more than anti-net neutrality propaganda," he said.

Telecom carriers have been cutting jobs for years, independent of what's been going on with net neutrality regulations, Turner added. He noted that Verizon officials said Thursday they planned additional job cuts beyond an earlier announcement that they planned to cut 13,000 jobs this year.

The assertion that net neutrality will lead to job cuts "is plainly unsupported by the facts, and actually contradicts what unfortunately has become the ISP industry's default behavior, as was demonstrated by Verizon yesterday," Turner said. "In this consolidated industry, as revenues rise, jobs are cut."

To predict the impact of net neutrality regulations, Bazelon looked at bidding in the C block in the 2008 auction of the 700MHz wireless spectrum at the FCC. The FCC placed net neutrality rules on that block of spectrum, and it sold at a discount compared to other blocks, he said.

Bazelon also looked at the effects of broadband network sharing in Europe and on the sharing of rail lines in the U.K.

But the study fails to measure the number of other jobs that will be created through net neutrality rules, Turner said.

"With network neutrality, content innovation will prosper, furthering demand for high-capacity, ubiquitous Internet access, which in turn will stimulate ISP investment and increase the need for and the value of more jobs," he said. "But without network neutrality, ISPs will be incentivized to reduce network investments and jobs, in order to make congestion the norm."

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