Crandall and Singer Release Study Evaluating the Impact of the Telecommunications Act of 1996 on Productive Employment

January 5, 2004

A study released by Robert Crandall of the Brookings Institution and Criterion Economics, L.L.C. and Hal J. Singer of Criterion Economics, L.L.C. shows that the Telecommunications Act of 1996 has not increased productive employment in the telecommunications sector. Crandall and Singer criticize a previous study by the Phoenix Center, which purported to show that the Telecommunications Act was responsible for creating 92,000 new jobs in the telecommunications industry. Crandall and Singer review the methodology of the Phoenix Center and illustrate the flaws in the Center's analysis. The authors show that most of the new jobs were fleeting and did not contribute to higher output. Indeed, nearly 89 percent of the 158,000 new wireline jobs that were created between February 1996 and April 2001 have been subsequently eliminated.

Crandall and Singer explain that permanent jobs that contribute to output are a byproduct of facilities-based investment and the new services that such investment makes possible. The authors describe how the Telecommunications Act decreases the incentives for firms to invest in their own networks, thereby causing telecommunications equipment manufacturers and other sectors of the economy to suffer. Crandall and Singer conclude that the Telecommunications Act of 1996 has destroyed more jobs than it has created. Using the macroeconomic multiplier effect, Crandall and Singer estimate that the unbundling provisions of the Act have destroyed roughly 13,000 jobs throughout the economy through reductions in ILEC capital investment. Crandall and Singer further estimate that an additional 26,000 jobs will be eliminated by 2005, which would bring the cumulative effect of the unbundling provisions to 39,000 job losses.

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