New Study: Light-Touch Regulatory Environment Encourages Investment

On May 5, 2016, the Internet Innovation Alliance released a study entitled “The Impact of Broadband and Related Information and Communications Technologies On the American Economy.” The study’s authors, Kevin Hassett and Robert Shapiro, argue that the broadband and information and communications technologies (ICT) sector has grown tremendously over the past decade under light-touch regulation. However, the authors note that unnecessary and costly regulations, such as those imposed by the FCC’s Title II reclassification of broadband in the Open Internet Order, could harm broadband and ICT sector investment.

Here are some of the study’s key findings:

• In 2014, the U.S. broadband/ICT sector produced $1.02 trillion in value added for the U.S. economy, which is about 2.9 percent of GDP.

• In 2014, companies within the broadband/ICT sector employed 4.9 million full-time equivalent (FTE) jobs or 4.2 percent of all U.S. private employment.

• Including the 2.8 million FTE jobs created by demands in goods and services by the broadband/ICT industry, the sector was responsible for 7.7 million FTE jobs or 6.4 percent of all U.S. private employment.

• In 2014, the average compensation for an FTE broadband/ICT employee was $104,390, which is 59.3 percent greater than the average compensation earned by other U.S. workers.

Mr. Hassatt and Mr. Shapiro state that “the large economic effects associated with the broadband/ICT sector have developed and grown in an environment of light federal regulation.”  Although this study does not estimate the direct impact of the Open Internet Order, the authors say that “rising regulatory costs in this sector will adversely affect its investments,” and “such adverse effects on investment would be felt not only by broadband/ICT companies, but also by companies in other industries that invest substantially in broadband/ICT goods and services.” Therefore, Mr. Hassatt and Mr. Shapiro “would expect that the negative effects of such regulation on investment, output and employment could all be substantial.”

For more on the adverse impact of Internet regulation on broadband investment, see my October 2015 blog.