Redux: Does Broadband Belong in the Economic Stimulus Package?

Neil Netanel

The economic stimulus bill provides for $7.2 billion in grants, loans, and loan guarantees for construction of rural broadband internet. In a February 11th post, I questioned whether that sizable government expenditure truly serves the job-creation goals of the stimulus package, as opposed to those of telecommunications law and policy generally. Articles in the Washington Post (Skepticism Arises Over Rural Broadband Stimulus) and New York Times (Rural Broadband: No Job Creation Machine) over the last couple days have posed the same question. Both articles refer to a study co-authored by Raul Katz, Director of Business Strategy Research at Columbia Business School's Institute for Tele-Information.

Katz's study estimates that the capital investment in broadband construction funded under the stimulus legislation would yield approximately 128,000 jobs over a four year period, as compared to 152,000 jobs that a similar investment in "roads and bridges" would generate. The study also finds as unsubstantiated the claims that, once constructed, rural broadband's network effects would produce significant numbers of new jobs. Katz and his co-author estimate that jobs from network effects could range from 0 to 270,000 jobs over four years, with anectodal evidence pointing to the lower end of that range. In particular, Katz and his co-author note that (1) a saturation effect as broadband penetration reaches high levels nationally might limit broadband's economic impact, (2) broadband can generate increases in productivity that can actually reduce jobs (something which in normal times would be an efficiency gain, but which would run counter to the job-creation goals of the stimulus package), (3) broadband enables the outsourcing of jobs, which can also reduce jobs in the area targeted for broadband deployment (and perhaps in the US generally), and (4) job creation in the targeted areas might simply come from relocated jobs from others areas of the US and thus should not be considered as creating incremental employment.

It does appear that telecommunications policy warrants far greater government investment in broadband. US government investment is far below that of other countries with greater broadband deployment. But those telecommunications policies should arguably take a back seat to job creation at this point, and doubts about whether the broadband investment provided for under the stimulus package will actually yield as much job creation as other investments calls into question whether broadband belongs in the package.
Posted 7:39 PM by Neil Netanel [link]