- Telecommunications was the driving force behind the great economic boom of the late ’90s. Between 1996 and 2000 the telecom industry grew at twice the rate of the national economy. By March of last year telecom companies had reached a market value of $3 trillion, and their share of the national GDP had risen to almost 6 percent. The Internet, and wireless and other telecom services, spurred investment in information technology, which by 1999 accounted for 43 percent of private, nonresidential investment. To a great extent, the boom of the late ’90s was a telecommunications boom.
By the same token, the bust of the early 2000s is being driven largely by a collapse in telecom. The industry has lost an estimated $2 trillion in paper value on the stock market–more than eight times what it cost to bail out the savings and loan industry a decade ago. New investment capital, vital for innovation, has dried up. In the first six months of this year (i.e., before WorldCom’s bankruptcy) telecom lost 225,000 jobs, one-fifth of the total jobs lost in the country. And with thousands of miles of excess capacity in fiber-optic cable, and as much as $500 billion in questionable debt, the industry may continue to hemorrhage value and jobs for the foreseeable future–potentially imperiling the country’s overall recovery. Says former Federal Communications Commission (FCC) chairman Reed Hundt, “If the communications sector doesn’t start attracting investment again, it’s going to be hard for business investment in general to increase. And if that doesn’t happen soon, the whole economy will begin to shrink again.”
The government official most responsible for turning telecom around is the current FCC chair, Michael Powell, son of Colin. Articulate and well-liked on Capitol Hill, Powell was the first choice for the FCC job of former Senator Commerce Committee chair John McCain and House Commerce Committee chair Billy Tauzin. But Powell has proven a disaster. He has equivocated, frustrating even ardent supporters like Tauzin; and when he has finally acted, it has been to prolong rather than shorten the telecom slump. Like Harvey Pitt, the chairman of the Securities and Exchange Commission (SEC), Powell would be ripe for replacement–if his feckless, ideological approach didn’t so perfectly reflect the president he serves.
y Powell’s own admission, the key to reviving the telecom industry is stimulating the growth and improvement of broadband–the high-speed Internet connections that are widespread in business but have only incrementally made their way into consumers’ homes. High-speed Internet connections–carried either over cable TV lines or phone lines (called DSL, for “digital subscriber line”)–could speed the technological convergence between the phone, the computer, and the television and spark new investment in hardware, software, and infrastructure. As Powell himself stated in testimony last month before the Senate Commerce, Science, and Transportation Committee, “Broadband very likely holds the key for the long-term recovery of the telecommunication industry, and indeed our nation’s long-term economic growth and its ability to compete on the global stage.”
But the growth of broadband is lagging….