FCC is killing jobs

In early October, the Phoenix Center released a study, “Communications policy and employment effects in the information sector,” that claims the FCC’s policies are killing jobs. The analysis suggests that the agency’s regulations could result in job losses exceeding 300,000 for a 10 percent decline in capital expenditures. Phoenix Center’s analysis states, “That 10 percent negative shock to capital expenditures in the information sector results in an average loss of about 130,000 information-sector jobs per year in the following five years. Including indirect jobs, the job loss could be as high as 327,600 jobs, noted the research.

“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,” say the reports’ authors.

“At a time when unemployment is high and the economy is faltering, anti-investment telecom and broadband policies are ill-advised,” observed Phoenix Center President Lawrence J. Spiwak. “The data reveal that increasing investment in communications networks increases sector employment, and these jobs are relatively high-paying jobs. The heavy-handed regulatory mindset of the current FCC is not good for investment, so it is not good for jobs. Moreover, there is no evidence that the proposed regulations are good for consumers.”

The Phoenix Center’s report further supports its conclusions by noting that numerous other studies, including one by the Communications Workers of America and another, “Net Neutrality, Investment & Jobs: Assessing the Potential Impacts of the FCC’s Proposed Net Neutrality Rules on the Broadband Ecosystem” by Davidson and Swanson, have reached similar conclusions. The report’s authors say, “All of these studies conclude that employment, both in and outside the communications industry, is highly responsive to capital expenditures by communications firms. Consequently, it is argued that, depending on the response of firms to regulatory interventions, public policy may have significant positive — or negative — employment effects.”

It didn’t take long for the FCC to claim that the Phoenix Center was full of hot desert air. The FCC’s chief of the Office of Strategic Planning, Paul deSa, in a blog post, called the Phoenix paper a "frothy mix of algebra and math jargon." He also said about the report, "23 pages of theory actually says nothing at all about the practical effect of FCC's agenda on new job creation."

deSa said the report was little more than “convoluted technical jargon.” He went on to claim the FCC “would rather do the hard work of implementing real-world policies that help incumbents and innovators create real jobs and investments.”

George Ford, chief economist at the Phoenix center, countered deSa’s claims saying that the commission was simultaneously proposing heavy-handed price regulation in its Open Internet Notice of Proposed Rulemaking. The result of such regulation on the Internet, Ford said, would be a disincentive for the private sector to invest in new technology, resulting in further job loss.

Not content to let the matter end, the Phoenix Center’s Lawrence J. Spiwak, responded to deSa saying, "As we and others have pointed out, the FCC risks sabotaging its own efforts by trying to impose common carrier regulation on broadband transport. Our paper simply provides an econometric multiplier to measure the effect of these proposed regulations on jobs, finds this effect to be significant, and will serve to undermine any good that they've done."

This is a case of never mind the facts, my (bureaucratic) mind is made up. These regulators often think they know more about business than anyone who actually runs a business. “Trust me,” they say. “We know more about how you should run your business than you ever could."

Wanna bet?