Genachowski Making Job Growth a Key Discussion Point

At CTIA last month, Genachowski cited a study that found “wireless has contributed to the creation of 1.6 million U.S. jobs in just the past few years.” In early 2009, “the mobile apps economy barely existed,” he said. “Today it alone supports nearly 500,000 jobs.” Genachowski offered similar comments at the New Jersey Apps Challenge in Hoboken, N.J., the previous month (CD April 12 p6). At the GSMA World Congress in Barcelona, Spain, in February Genachowski cited new research that found “wireless innovation and investment has already contributed to the creation of 1.6 million U.S. jobs in just the past few years.” At CES in January, Genachowski mentioned jobs 11 times. He said the Jobs4America initiative could mean “100,000 new broadband-enabled customer-service jobs created in the U.S. over the next two years."

A senior FCC official defended the chairman, saying all of the studies cited were from independent sources. “The numbers are not political, they're just the numbers that are out there,” the official said. “We don’t create the jobs. The private sector creates the jobs. Our job is to make sure we develop policies to help the sector flourish and be successful.” But others questioned the numbers cited by Genachowski.

From an economist standpoint, it’s hard to quantify the effect broadband has on the economy and job growth, said Scott Wallsten, economist to the team that developed the FCC National Broadband Plan. Some studies rely on gross domestic product growth and then tie that to broadband expansion, he said. But from 2008-2010 the economy was shrinking while broadband was still increasing. Researchers could draw a “negative correlation” in that case between broadband and jobs, Wallsten said.

"If you think about all of the millions of things that go on in the economy, it’s hard to link just one thing -- residential broadband to jobs,” Wallsten said. “Because people can watch HD porn better there’s going to be more jobs? Yes, you get construction jobs in the short term” of broadband networks, he said. “In terms of how it helps the economy, there isn’t in the short run any evidence of that.” To say that investing more in broadband will mean more jobs is “completely baseless, especially since all of these analyses focus on residential broadband,” Wallsten said.

Quantifying the effect of broadband on jobs is difficult, agreed Phoenix Center economist George Ford. “Conceptually the idea that a technology like broadband is going to be a key determinant of economic growth at this point in time is a sound hypothesis,” he said. “Now whether or not the numbers we've estimated are all that good or not is another question. The models are dealing with very aggregate data, which is affected by many things. Does the economy drive broadband or does broadband drive the economy? You have to have a statistical model that can decipher between the two. Most of the models I've seen don’t bother to do that. In periods like 2008-2009 when jobs peaked and then bottomed out, it’s hard to measure anything,” Ford said. “Who knows what’s driving all that?” he said. “It’s a very difficult problem.”

Econometric connections can be difficult to draw, said Michael Mandel, economist at the Progressive Policy Institute, author of one of the studies that has been cited by Genachowski. Mandel said he based his report on jobs created by “the app economy” based on a study of job listings. “The question I'm really asking is what are companies hiring for,” he said. “It turns out they're hiring for people have the knowledge that goes along with ‘can you design apps? Can you use them? Can you help support them?’ What I find is there’s a very, very vibrant labor market. … I can actually point to the real demand out there.” Mandel said in making his calculations he used a “a very, very, very conservative multiplier."

Others said Genachowski’s comments are unusually political for a regulator since jobs are likely to be such a big issue in the 2012 campaign. “Chairman Genachowski is now just another PR flack for the President Obama reelection effort,” said Seton Motley, president of Less Government, which often criticizes what it sees as government overreach. “Given the FCC’s woeful track record at both ‘assisting’ the private sector and universal connectivity, the chairman and his big government cohorts should simply stand down."

The statements are “very political” for an FCC chairman and Genachowski “should be careful,” said an ex-commission official. “This is actually pretty typical talking points … in a presidential election year, emanating from all facets of government, including independent agencies,” said a government official. “If you look back through history you'll find, whether its Democrats or Republicans in charge of the FCC, more often than not the FCC chairman will start talking about their accomplishments. Not only does that try to help the messaging for whomever is in the White House, but it helps to frame the respective chairman’s legacy.” The official said FCC issues “are rarely at the top of mind of most voters. The best political result such speeches and talking points can produce is to make sure no flank is exposed. It’s more defensive than offensive.”

"Why would we not tell a good story that’s happening in our country?” the senior FCC official responded. “That’s not political. That’s pro-American.” Mandel doesn’t “see this as being politically driven at all,” he said. “I think if you asked anyone to list the top sector that is actually growing, the one that’s going to be up there is this communications/app economy,"

Drawing a connection between broadband and jobs, per se, seems fair, said Free State Foundation President Randolph May, who often criticizes regulation. “I don’t doubt that the increasing availability and use of broadband is a net positive for our nation’s economy, including for job creation, although it is difficult to measure short-term effects,” he said. “Even though I would hope Chairman Genachowski would exercise appropriate caution in making specific jobs claims, I don’t have a problem with him drawing that connection. What I have a problem with is drawing the wrong public policy conclusions from the connection. Too often, I think the chairman tends to equate commission action that somehow supports specific competitors or market segments to the detriment of other competitors or market segments with overall benefit to the economy or consumers. Even if well-intentioned, the commission is not very good at doing ‘industrial policy.’ The broadband policy that will most benefit the economy and create more jobs is a deregulatory one."

Other industry observers defended Genachowski. “I don’t think it’s too blatantly political, since every single company and advocacy group looking to move policy in broadband has sought to cast this as a jobs issue,” said Public Knowledge Legal Director Harold Feld. “Unsurprisingly, the Chairman of the FCC casts his argument in the language of the day, to respond to his critics and sell his policies. This is no different from 5-10 years ago, when everything was about ‘deployment’ or ‘investment.’ [Former Republican Chairmen] Michael Powell and Kevin Martin were always explaining how their actions would encourage deployment and investment, competitors were always bemoaning how deregulation would eliminate their investment and deployment, while incumbents were always assuring us that deregulation would ’spur deployment’ while regulation would ‘chill investment.'"

"While quantifying economic benefits of broadband deployment can be tricky business, my sense is there’s general agreement that expanding the reach of high-speed Internet service and increasing adoption are net positives for the economy and society generally,” said Jeff Silva, analyst at Medley Global Advisors. “I do not necessary regard the linkage of universal broadband to high-profile economic themes as crossing any lines per se, though doing so in a presidential-election year when the economy and jobs are front and center for voters could be a delicate balancing act for Chairman Genachowski."

"While it’s difficult to quantify the contributions that broadband deployment, adoption, and improvement make to the economy to the satisfaction of most economists, it’s probably no more difficult than any other economic analysis,” said Richard Bennett, senior research fellow at the Information Technology and Innovation Foundation. “We know that infrastructure development leads to increased productivity, and that productivity leads to economic growth. While there’s a lot of talk in Washington about jobs these days, it’s not really a partisan issue. We all want employment to increase, even if we differ on the best way to make it happen.”