by Jessica Milano
Senior Fellow, Democratic Leadership Council

With the nation facing record deficits, policymakers need to focus on what can be done outside of tax cuts and spending hikes to jumpstart the nation’s economy. One thing government can do is create an economic climate for business to invest, innovate and hire. That is a key finding of a report I released for the Democratic Leadership Council earlier this year titled, “Where Jobs Come From: The Role of Innovation, Investment, and Infrastructure in Economic and Job Growth.”

The third key finding of the report, driven by economic research and analysis, is that job creation is directly tied to business investment. For the purpose of this posting, I would like to focus on one area where investment has had and will continue to have an impact on job creation– broadband.

The broadband industry has been a lighthouse during this economic storm. According to a report released by Broadband for America, while business investment (nonresidential private investment) declined by 18.1 percent during the recession, broadband investment declined by only 3.3 percent buoyed by over $100 billion investment by AT&T and Verizon in wireless and wireline networks. This is significant because, as I point out in my report, investment in information and communication technologies (ICT) like broadband contributed almost one percent (0.8%) to average annual real GDP growth in the United States from 1994 to 2000.

But what does all of this investment in innovation and broadband infrastructure mean for jobs? A great deal, in fact. There are two specific ways in which this investment creates jobs. Direct jobs in the industry itself through developing new technologies, building the infrastructure, and laying broadband lines. And indirectly through the increased opportunities that are available by having access to a 21st century communications network. Application developers for smart handsets are one example as are new companies like Zip Car which rely on customers’ access to mobile broadband.

Several studies have shown that fast, reliable broadband investment improves the operational efficiency of businesses, making it easier to reach new markets, grow business, and hire additional employees. One study in particular, released by the Brookings Institution, found that for every three million new lines deployed, nearly 300,000 economy-wide jobs are created. This is particularly important for small businesses and businesses in small communities.

While this post has highlighted the enormous amount of private investment from broadband service providers, it is worth noting that innovators, entrepreneurs, and small businesses create up to two-thirds of new jobs annually. It is these types of jobs, that rely on broadband, that will continue to lead us out of this current economic downturn and into a greater economic future for America.

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Although the American economy is suffering and facing a slow climb to recovery, broadband is one sector of the economy that challenges our modern state of affairs.  Broadband actually comprises a significant and vital component of our current economy, holds the key to our economic recovery, and offers a solution to growing employment.  Here’s how:

1.     The broadband industry invests roughly $70 billion annually, which creates jobs not only in the building and maintenance of infrastructure, but also indirectly through Internet jobs like online advertising, entertainment, social networking, e-commerce, and more.

2.     The converging broadband sectors of telecom, media and IT lead U.S. GDP growth, adding nearly $900 billion annually and expanding at a rate that is two to five times faster than the overall U.S. economy

3.     Broadband investment results in robust employment effects. Conversely, according to ITIF, a reduction in investment of just 2 percent by the broadband services industry would eliminate between 24,000 and 31,000 jobs.

4. Massive broadband investments are necessary to meet demand and growth in IP voice, data, and video.

5. Broadband investments provide the infrastructure for additional investments in the creation and implementation of advances in the healthcare, education, and energy sectors.

6.     Inspiring broadband adoption will continue this trend.  A 2008 report by Connected Nation found that just a seven percentage point increase in broadband adoption could result in the creation of 2.4 million jobs.

7.     A 2009 report by ITIF estimated that a $10 billion investment in broadband would produce as many as 498,000 new jobs.

8.     Vice President Biden stated that Recovery Act funding of broadband technology “will create jobs across the country and expand opportunities for millions of Americans and American companies.”

9.     Broadband even helps in rural economies by improving business processes and strengthening access to new markets.

10. Broadband also provides indirect support for those suffering during the economic downturn.  According to a 2009 Pew Internet release, approximately 88 percent of Internet users “have gone online to get help with personal economic issues that have arisen in the recession and to gather information about the origins and solutions to national economic problems.”

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What is the relationship between jobs, innovation, and regulatory policy? According to a recent memo released by Michael Mandel of the Progressive Policy Institute (PPI) titled, “The Coming Communications Boom? Jobs, Innovation and Countercyclical Regulatory Policy”, they are integrally connected.

With America attempting to pull itself out of the greatest economic downturn since the Great Depression, and with the national unemployment rate currently hovering just below 10%, one industry is stepping up to the plate and creating new American jobs – the communications industry. This memo released by PPI states, “Internet companies, along with firms engaged in wireless telecom and computer systems design, seem to be emerging as ‘job leaders’ in the next economic expansion.”

But what role will regulatory policy play in continuing this “job awakening” that we have seen in the communications industry? The answer depends on what types of regulatory policies are adopted moving forward. This memo by PPI calls for “countercyclical regulatory policy” to be applied to the telecommunications industry. Traditionally, this type of policy has been reserved for the financial industry. But Mandel argues that, “Countercyclical regulatory policy could bring enormous benefits. Investments would pour into the communications sector, and hiring would step up, as companies try to take advantage of the permissive regulatory period to build out their businesses.”

Read more of Mandel’s case here.

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The economic downturn and credit crisis of the past two years taught us something – we can’t continue to do things the same way we did before. A 21st century approach is required to navigate the 21st century global business environment. That was the crux of a discussion on Thursday at CES titled “Staying Competitive in Turbulent Times.”

The discussion featured marketing officers from several different technology companies – including ATT, Cisco and Hewlett-Packard – who have been at the forefront of helping the U.S. right the ship in a rather turbulent economic storm. The message was clear – technology is the answer to a 21st century competitive economy.

When asked towards the end of the conversation what consumers can expect in 2010 and beyond, the answer was unanimous. Expect more video, more mobility, and more integration of products and devices consumers already enjoy. And what will drive this integration and interconnectedness?

Broadband.

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