FCC says broadband expansion will add jobs

The Federal Communications Commission says its plan to bring broadband Internet to the countryside will produce 500,000 jobs over the next six years.

The FCC voted last month to spend billions to subsidize broadband businesses in the countryside. The money is not a new outlay--it previously went to the landline operations at rural phone companies.

The agency released the rules for redirecting the spending to broadband on Friday. The effort will overhaul the so-called "high-cost fund," which is about $4.5 billion, so that it goes toward broadband instead of telephone. This fund is part the agency's larger, $8 billion universal service system that also includes communications subsidies to get technology in schools and to provide service for low-income people in cities.

The vote to overhaul the high-cost fund to create a "Connect America Fund" last month was a landmark decision by the agency, after years of complaints about the program's funding of a dated technology: landline service.

The effort, the FCC says, will bring broadband access to 7 million Americans who cannot currently get a high-speed connection. There's often no profit motive for companies to build expensive lines to rural areas where there are few customers.

The icing on the cake, according to the FCC? Lots of employment opportunities. The commission says that the build-out over the next six years will create 500,000 jobs.

That's 111,111 jobs created per billion dollars in spending. When AT&T promised to spend $8 billion bringing broadband to the countryside--if its merger with T-Mobile was approved--a study by the Economic Policy Institute found that the merger would at most create 96,000 jobs.

That's 12,000 jobs per billion dollars--far fewer than the rate of job creation projected by the FCC.

How does the FCC get to 111,111 jobs per billion in spending? In response to inquiries, the FCC sent the names of two studies it drew on to corroborate its estimate, but those did not specifically study the FCC's plan voted on last month.

"Conservatively, a 1 percent increase in broadband deployment will increase the rate of employment by between 0.14 and 0.5 percentage point," an FCC spokesman said by e-mail.

"Over the next five years, we expect 3.6 million rural households to gain access to high-speed Internet through our reforms, a gain of about 10.2 percent. The 10.2 percent deployment gain could increase employment by between 1.45-4.11 percentage points, creating between 320,000 to 905,000 more jobs, based on a rural workforce of 22 million."

That's half the equation.

"In addition, a recent OECD (Organization for Economic Cooperation and Development) study suggests a 10 percent increase in broadband coverage raises GDP by about 1.2 percentage point, so a 3.1 percent increase in broadband deployment nationally (increase of 3.6 million households out of a total of 116 million), increases GDP by 0.4 percent, or $56 billion over five years. Such GDP growth could increase the employment rate by 0.12 percent, which is 190,000 jobs over 5 years.," the spokesman added.

"550,000 is the midpoint between 190,000 jobs and 905,000 jobs."

John Mayo, an economics professor at Georgetown University's McDonough School of Business, said that it is hard to say how good the FCC's numbers are, but he said he would guess that the method is probably defensible. Mayo says that jobs can be ascribed to broadband spending from directly laying fiber in the ground, but that the number can rise when other effects are included, such as jobs resulting from information flowing more rapidly.

"It may get to be a bigger number when you're thinking about making the American people more productive," he said.

The job claims in the FCC's publicity materials are not universally endorsed by those who support the policy.

Robert McDowell, a Republican FCC commissioner who voted for the Connect America Fund order, stopped short of saying the job claims are on target.

"That figure comes from the chairman's office so we don't know what the factual basis is. Therefore, we cannot endorse it," he said.