Researcher says broadband won't create big job growth

Investment in broadband might not create as many jobs as has been predicted, according to the author of one such study.

Robert Crandall, the co-author of a widely cited forecast that nearly 300,000 US jobs would be created for every percentage point rise in high-speed Internet use said these and similar estimates are "a gross overestimate."

"There is a great deal of overstatement in most of these studies," said Crandall, a Brookings Institution economist and co-author of the frequently-cited paper with that estimate.

US lawmakers are proposing grants between $6 billion (4 billion) to $9 billion and tax credits to encourage investment in high- speed Internet, as part of an economic stimulus plan winding its way through Congress costing up to $900 billion. The UK has proposed a similar deal, and the European Union is looking at investing in broadband, believing it will help spur job creation.

The 300,000 jobs estimate has been used in newspapers and cited by other publications advocating investment in high-speed Internet, or broadband.

The Brookings Institution study, published in July 2007, is not particularly relevant now because of differing employment and related migration trends at the time of the study, Crandall said.

Attempting to extrapolate it nationwide at this time is a "gross overstatement," he said.

Most the data on jobs and broadband is not relevant because it doesn't apply to underserved, mostly rural and high cost areas targeted in the stimulus package, said Shane Greenstein, a professor at Northwestern University's Kellogg School of Management.

"The experience of Manhattan in 2005 has no relationship to the experience in West Texas," Greenstein said.

Chris King, an investment analyst at Stifel Nicolaus said the proposals targeting unserved rural areas are not enough to propel rural providers to invest in any event, largely because they do not address ongoing operating costs.

"We believe the current plans are unlikely to stimulate private sector investment in unserved areas," King said.

King, concurring with several Wall Street analysts, said tax credits for ultra-fast Internet speeds for underserved areas would likely only benefit Verizon Communications and perhaps some cable companies.

Click here to read more about the UK's broadband investment, laid out in the Digital Britain plan.