Net Neutrality Rules Mean Job Losses Consultancy

Written by Kelly
February 12, 2010

The implementation of net neutrality rules would cause job losses, not gains, says one economic consultant.

If the feds really want to create jobs, they’ll have to end the push for net neutrality regulation.

That’s according to a new report from research and consulting firm Entropy Economics, headed by a former senior fellow at pro-free-market think tank, The Progress & Freedom Foundation. And Bret Swanson’s analysis comes as the United States economy continues to shed jobs – companies laid off 20,000 workers in January, although that marked a five-month low of 9.7 percent unemployment.

At such a desperate time, the worst move the Obama Administration could make would be to impose more regulation on Internet service providers, Swanson says in his February report, “What Would Net Neutrality Mean for U.S. Jobs?” The proposed rules, in their extreme form, could “prohibit many technologies and business plans used today on the Internet, not to mention stifling future experimentation and entrepreneurship.” Worse, he points out, there’s a good chance operators would “immediately” throttle back capital expenditures – which amounts to about $65 billion annually. The entire information technology sector spends $455 billion, Swanson said.

Capex reductions mean job losses, Swanson said – not just among the “tens of thousands of workers who build and maintain … networks, but in the vendor and software supplier chain as well.”

And if numbers from the American Consumer Institute (ACI) – a non-profit that bills itself as a consumer and public policy advocate but that’s run by a former Bell Atlantic (Verizon) chief economist – are accurate, Swanson could be on to something. The ACI, led by telecom-industry consultant Stephen Pociask, found in January that, for every $1 billion in revenue, “core” network companies provided 2,329 jobs, while “edge” companies provided 1,199.

“Net neutrality could substantially reduce the willingness of service providers to invest in new wired and wireless networks,” Swanson said, and, as a result, translate into thousands of job losses.

Non-partisan economists at Georgetown University’s Business & Public Policy Center agreed in a Jan. 2010 report. Net neutrality advocates tend to overlook that “both the initial establishment of the network and its ongoing management requires investment,” they wrote. “…Constraining [broadband] service providers’ ability to maximize their profits may retard network innovation.”

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