Economic Development and Job Creation

Pick up a newspaper today and the front page is covered with troubling stories about our nation's flagging economy. Gas prices soar. Real estate values plummet. Foreclosures skyrocket. Layoffs escalate. Wages stagnate. Federal budget and trade deficits balloon out of control. The shrinking middle class finds itself increasingly at risk and drowning in debt. More and more American jobs - blue- and white-collar - are lost overseas to foreign workers earning lower wages in a world increasingly interconnected by highspeed data and communications networks.

In comparison with many other developed and emerging nations, America's steady decline in broadband penetration, speed, and price place our economy and workers at a serious competitive disadvantage. Economic and job creation success stories are more likely to take place not in the United States, but in countries with a more competitive combination of robust, affordable broadband and well-trained knowledge-workers. That is why in today's world, America requires a well-considered National Broadband Strategy. This is not just a matter of creating jobs and stimulating economic growth here at home; ultimately, it is a matter of economic necessity and survival in the globally-connected and competitive marketplace.

Deployment of Universal, Robust, Affordable Broadband will Generate Billions in Economic Development and Create Over a Million Jobs

Universal deployment and adoption of robust and affordable broadband will stimulate economic growth and create good-paying jobs, according to several private and government studies. For example, in 2001, Criterion Economics researchers, in a study underwritten by Verizon, concluded that in the United States, "deploying universal broadband could generate $500 billion a year in added economic development."20

In 2002, TeleNomic Research concluded in a study for the New Millennium Research Council that the deployment of universal, fast, and affordable broadband would also prove a boon to employment, responsible for creating an estimated 1.2 million permanent jobs, specifically:

• 166,000 jobs in the telecommunications sector;
• 71,700 manufacturing jobs generated by the direct purchase of network plant and equipment and customer premise equipment; and
• 974,000 indirect jobs created if a next-generation network
  were built.

Importantly, concludes the research, these would be "well-paid, high-skill jobs" that would provide "a welcome boost to our economy."21

In a 2006 study commissioned by the U.S. Department of Commerce, researchers concluded

The results support the view that broadband access does enhance economic growth and performance, and that the assumed economic impacts of broadband are real and measurable.

We find that between 1998 and 2002, communities in which mass-market broadband was available by December 1999 experienced more rapid growth in employment, the number of businesses overall, and businesses in IT-intensive sectors, relative to comparable communities without broadband at that time....

The positive direction of broadband's impacts was found to be robust across the different models tested at the zip code level, including models of economically distressed areas such as the Appalachian region. Our findings thus support the conclusion that broadband positively affects economic activity in ways that are consistent with the qualitative stories told by broadband advocates. Economic development practitioners who have been spending their time or money promoting broadband have indeed been engaged in a worthwhile pursuit.... Broadband is clearly related to economic well-being and is thus a critical component of our national communications infrastructure.22

Broadband usage and employment are strongly linked. A 2007 Brookings Institution report found that "for every one percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2 to 0.3 percent per year. For the entire U.S. private non-farm economy, this suggests an increase of about 300,000 jobs, assuming the economy is not already at 'full employment.'"23

In November 2007, the Sacramento Regional Research Institute reported, in a study commissioned by AT&T, that there was a "strong correlation between broadband growth in California and the number of new jobs available." Reviewing California's overall broadband adoption between 2001 and 2006, the study found that an increase in broadband use was tied to an increase in jobs - more jobs were created than they would have during "business as usual." The institute estimates that for every one percentage point of the adult population using broadband, the employment growth rate rises by 0.075 percentage points - the payroll growth rate also grows by up to 0.088 percentage points. Based on an estimate of "strong" broadband growth over the next several years (about 3.8 percent), SRRI says that California could see a cumulative 10-year gain of 1.8 million jobs and $132 billion in payroll.24

Similarly, Connected Nation, which grew out of the ConnectKentucky broadband mapping, deployment, and adoption initiative, concluded in February 2008 that a seven percentage point increase in broadband adoption across the United States could result in:

• an additional 2.4 million jobs per year;
• $662 million saved per year in reduced health care costs;
• $6.4 billion per year in mileage saving from unnecessary driving;
• $18 million in carbon credits associated with 3.2 billion fewer lbs. of CO2 emissions per year in the United States;
• 3.8 billion hours saved per year from accessing broadband at home; and
• $134 billion per year in total direct economic impact of accelerating broadband across the United States.25

Numerous community case studies also provide persuasive evidence of the economic benefits of robust broadband deployment. One particularly striking illustration of the power of broadband to generate economic development is from Cedar Falls and Waterloo, two communities located side by side in the Cedar Valley region of Iowa. Unhappy with the pace of private broadband deployment in their community, local leaders in Cedar Falls chose to deploy a citywide municipal high-speed fiber network around that town. In nearby Waterloo, local leaders chose to rely only on broadband provided by the private local phone and cable companies, which was slower and not as universally available as the fiber deployed in Cedar Falls.26 The result was that numerous companies and businesses relocated from Waterloo to Cedar Falls, creating new jobs, raising property values, and providing other economic benefits that were not enjoyed by Waterloo. Observed Waterloo Mayor John Rooff about the competitive advantages of Cedar Falls's high-speed broadband network: "Fiber optics is the key to Waterloo's future growth. In order for Waterloo with its businesses to move into the 21st century, we need fiber optic capability. . . . I believe it has hurt us economically to not be able to provide fiber optics to businesses locating in our city."27 Concluded the case study:

Although the implementation of Cedar Falls' Communications Network is relatively young, Cedar Falls is already reaping economic and community benefits.... There may be no single thing more important in a community's efforts to achieve economic well-being than to grasp the role that telecommunications plays in creating meaningful jobs, enhanced education and world class healthcare. Now, more than ever, the direct link is evident between advanced communications and productivity and economic development.28

Studies of robust broadband deployment in Lake County, Florida,289 Lafayette, Louisiana, Fort Wayne, Indiana, and other U.S. communities30 all demonstrate similar economic and competitive benefits resulting from these investments.

Rural communities around the country that have access to robust, affordable broadband services are competing successfully for high-paying "knowledge work" jobs that might otherwise be exported abroad. This "farmshoring" of knowledge work to lower wage and lower cost-of-living areas of the United States, in contrast to "offshoring" that same work to foreign lands, is well illustrated by the experience of Watford City, North Dakota, a town where the nearest traffic light is 50 miles away. In Watford, life is slow, but the broadband is fast. A programming and call center operates out of an old John Deere tractor showroom there and programmers make $40,000 a year, far above the prevailing wage rate in that remote western North Dakota town.31

In rural southwest Virginia, an area economically depressed by the loss of tobacco, coal mining, and furniture manufacturing jobs, local and regional officials joined forces to fund and deploy a state-of-the-art regional telecommunications infrastructure, giving current and new industries in the area a competitive advantage in a connected, global economy. Two IT giants, CGI and Northrop Grumman, soon thereafter announced that they would locate major telecommunications operations in the area, creating 733 high-skill, high-wage IT jobs and investing $30 million in private funds. CGI reported that the average annual salary for its 300 employees would be about $50,000, while Northrop Grumman estimated an average annual salary of $40,000 for its 433 workers. Both figures are well above Russell County's current average annual salary of $27,111. In addition to the direct economic benefits, significant secondary and indirect benefits to the region have been observed. Large new, unsubsidized housing developments have been built. A gourmet coffee shop opened, a new hotel was constructed, and plans were announced for the first 18-hole golf course between Abingdon and Tazewell.32

Indeed, Virginia's efforts to develop high-tech, high-wage jobs in the southwestern parts of the state have been so successful that some fear there will be a shortage of qualified IT workers to staff the newly created positions. To address this problem, and to reunite families torn apart by the economic malaise of the region, a "Return to Roots Project" was created to bring home young Virginians who left the region in search of economic opportunity.33

A National Broadband Strategy Will Spur

The qualitative and quantitative evidence is clear and consistent: at the individual, local/community, and national levels, the deployment of fast, reliable, and affordable broadband will stimulate tremendous economic development and create hundreds of thousands - if not millions - of good-paying jobs that might otherwise be lost or go offshore.

As the University of Pennsylvania's Joseph Bordogna writes, civilization is on the brink of a new economic world order. The big winners in this increasingly fierce global reach for leadership will not be those who simply make commodities faster or cheaper than the competition, ultimately leading to a downward-spiraling competition for low wages and lower margins. Rather, the winners will be those who develop talent, techniques, and tools so advanced that reaching a dimension of innovation beyond competition is ensured.34

Increasingly, America needs to think in terms of fostering training, educational programs, and management systems that empower technology workers, build from its uniquely entrepreneurial culture, reinforce leadership in service industries with scientific discipline and data, and create unquestioned superiority in cutting-edge fields like nanotechnology, biotechnology, cognitive science, and information science and engineering. It means creating a workforce able and empowered to act on insight and experience, and an innovation system that is continually poised to deploy great ideas.35

A well-educated population is essential to retaining America's competitiveness in the global economy. The ever-increasing knowledge and skill demands of the 21st century require that secondary school preparation and requirements be better aligned with the knowledge and skills needed to succeed in postsecondary education and the workforce.

To promote significant and sustained economic development and job creation, and enhance America's economic and technological competitiveness versus other nations, the new Administration must take swift and bold action that will once again make the United States a world leader in advanced telecommunications infrastructure. As detailed above, on Day One of his Administration, the new President must issue Executive Orders that will result in the execution of a National Broadband Strategy to bring universal, affordable, and robust broadband to every household in America.

Recommendations

To help create jobs and stimulate U.S. economic growth, the President should:

1. Fully fund the America COMPETES Act including the National Science Foundation grant program for institutions of higher education that award associate degrees to recruit and train individuals from the fields of science, technology, engineering, and math to mentor female, minority, and disabled students in order to assist such students in identifying, qualifying for, and entering higher-paying technical jobs in those fields.
2. Set a national skills agenda to compete globally and to ensure a rising standard of living for Americans.
3. Implement provisions of the Food, Conservation, and Energy Act of 2008 aimed at extending broadband's reach into rural areas:
   
   1. Budget $25 million per year from 2009-2012 for loans and loan guarantees for the construction, improvement, and acquisition of facilities and equipment for the provision
      of broadband service in rural areas;
   2. Establish the National Center for Rural Telecommunications Assessment to assess the effectiveness of Department of Agriculture programs aimed at increasing broadband availability and use in rural areas;
   3. Direct the Secretary of Agriculture and the Chairman of the Federal Communications Commission to submit a report to Congress in June 2009 (and every three years thereafter) describing a comprehensive rural broadband strategy that includes:
      
      1. These recommendations:
         • Promote interagency coordination of federal agencies in regard to policies, procedures, and targeted resources, and streamline or otherwise improve the policies, programs, and services;
         • Coordinate existing federal rural broadband or rural initiatives;
         • Address both short- and long-term needs assessments and solutions for a rapid build-out of rural broadband solutions and application of the recommendations for federal, state, regional, and local government policymakers; and
         • Identify how specific federal agency programs and resources can best respond to rural broadband requirements and overcome obstacles that currently impede rural broadband deployment.
      2. A description of goals and timeframes to achieve the purposes of the report.