AT&T / T-Mobile Merger as “Stimulus Package”

by Mike Wendy on August 17, 2011

The President is out visiting rural America during the summer congressional recess, stumping his latest efforts to promote jobs in America.

Here’s a good idea which I think would rapidly boost infrastructure development, create good jobs, and generally stimulate our flagging economy – all without having to go to an ornery Congress to ask for a single U.S. taxpayer dollar.

Quickly approve the AT&T / T-Mobile merger.

The deal, which the companies say will bring new 4G LTE broadband infrastructure to an additional 55 million Americans, represents an immediate stimulus program that could help meet (not all, but certainly some of) the President’s goals.

At least one study – done by the left-leaning Economic Policy Institute (EPI) – estimates that anywhere from 55,000 to 100,000 direct, indirect and induced jobs will result from $8 billion of net new infrastructure investment enabled by the merger.

Because AT&T works closely with its union (CWA, which has endorsed the merger), many of the workers that the company directly employs will likely be well-paying union jobs.

The indirect jobs – such as those that support the expansion of new facilities, products and services – as well as the induced jobs – like those that result from direct and indirect workers having more money in their pockets to spend – add further heft to the multiplier effects of this job creation chain.

I think there’s good reason to believe that the EPI estimate is a tad conservative, too.  As Congress debated its Stimulus bill early in 2009, progressive economists at the Information Technology & Innovation Foundation (ITIF) Rob Atkinson, Daniel Castro, and Stephen Ezell took a look at the multiplier effect of IT investment in our economy. They concluded that “an additional investment of $30 billion in America’s IT network infrastructure [for broadband infrastructure, the smart grid and health IT]…will create approximately 949,000 U.S. jobs.”  In fact, a $10 billion investment in broadband alone would result in nearly 500,000 new or retained jobs, more than half of them in small businesses.

IT investments in our economy bring a lot of bang for the buck.  According to the study:

Between 1995 and 2002, for example, IT was responsible for two-thirds of total factor growth in productivity and virtually all of the growth in labor productivity in the United States.  During the period 2000 to 2005, IT continued to perform, contributing over 1 percentage point to growth in labor productivity.  And not only do IT infrastructure projects create more jobs than traditional infrastructure investments, in part because of the network multiplier, they also create more high-skilled, high-paying jobs. In fact, IT jobs on average pay 84 percent more than average jobs.

The implications of the EPI and ITIF studies are clear: More information and communication technology investment creates a multiplier effect that leads to greater job growth – not just in the short term, but in the long term, too.

If AT&T delivers on its promises, 97% of America will soon be covered by their new LTE services (up from 80%).  To me, this is the real benefit of the deal.  Not only will more Americans have access to LTE services, competition will be spurred at all levels in the ecosystem, too (do you think Sprint, Verizon and the other players are just going to sit on their heels and idly watch?  Think again.).  Consequently, American workers will have more high tech productivity tools with which to compete.  And those tools will be more powerful, innovative and cost-effective to boot.

Doing more with less – boosting productivity – means American workers can remain the most productive and competitive in the world.  This translates into more jobs and a healthier economy.

As the President has recently noted:

“Our job right now has to be doing whatever we can to help folks find work, to help create the climate where a business can put up that job listing, where incomes are rising again for people.”

The AT&T merger is an immediate stimulus plan – building needed infrastructure, jobs, and consumer demand – which doesn’t need taxpayer dollars to happen.

The President would do well to create the climate so that this job creating “stimulus package” gets quickly approved.

 

{ 3 comments… read them below or add one }

gator dad August 22, 2011 at 8:42 pm

Great Idea! Pro revenue builder without deficit financing. Good reason for the consumer to update service, buy new equipment. Company marketing dollars will be spent creating demand. And customer demand promotes jobs. This kind of Stimulus could ignite other pro business M&A.

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RevThwack September 2, 2011 at 2:52 pm

That study was from 2009 and had nothing to do with the proposed AT&T/T-mobile merger.

The AT&T/T-mobile merger would not create the opportunity for new infrastructure development, but instead would just hand existing T-mobile infrastructure over to AT&T.

The merger would result in the loss of jobs of many current T-mobile employees, as their positions would become redundant and already filled by current employees at AT&T.

AT&T has said they would bring 5,000 call center jobs back to the US if the deal goes through, but nothing would hold them to fulfilling that.

An AT&T/T-mobile merger would get rid of the lowest cost nationwide cell provider and leave only 3 companies behind, AT&T with 46% of the market, Verizon with 36% of the market, and Sprint with 18%.

An AT&T/T-mobile merger would create a new #1 carrier in the US and would in effect create a two company oligopoly of AT&T and Verizon, as combined they would control enough of the market to be able to shut out Sprint.

Make no mistake, the merger would be bad for everyone but AT&T. It would raise prices for the 34 million T-mobile subscribers, would eliminate jobs, and would kill competition in the cell service industry.

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Mike Wendy September 2, 2011 at 3:36 pm

Agreed that the ITIF study – which was trotted out for the Stimulus bill – is unrelated to the AT&T merger (it wasn’t designed for those purposes). That said, it, as well as other studies, reveal the jobs multiplier effect of new ICT on societies.

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