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Friday, May 11, 2012

Broadband, Start Ups and Policy

It’s a risky and costly endeavor to start up your own business. At the same time, of course, those start ups are critical to innovation, economic growth and job creation.

Consider that the Kauffman Foundation has found that young firms were responsible for nearly all the net job creation in the United States between 1980 and 2005, with new firms creating approximately 3 million jobs each year, and 40 million new jobs since 1980.

At the same time, advancements in telecommunications over the past few decades have served as valuable tools for entrepreneurs. A new report co-authored by Internet Innovation Alliance and Small Business & Entrepreneurship Council, titled “Start Up Savings,” looks at 10 key areas where broadband reduces the cost barriers for starting a new business.

Consider the savings in percentage terms between more traditional services and options opened up due to broadband access and service:

• Accounting services – potential savings of 87%

• Printing services – potential savings of 43%

• Telephone services – potential savings of 62%

• Website design services – potential savings of 88%

• Use of mobile apps – potential savings of 10%

• Logo design services – potential savings of 92%

• Home office option – potential savings of 100%

• Incorporation services – potential savings of 75%

• Video conferencing vs. travel – potential savings of 95%

• Online news vs. newspaper subscriptions – potential savings of 100%

Based on very conservative assumptions, in dollar terms, these savings could top $16,000 for a start up enterprise. That’s huge.

Of course, there’s a role here for government in terms of making sure spectrum is available to the marketplace, and allowing that spectrum to be allocated by the market to its most productive purposes.

Indeed, as noted in a recent Reuters report, many key industry players point to a looming spectrum crisis. Glenn Lurie, AT&T's president of emerging enterprise and partnerships, was quoted, “Everybody is going to be talking about the fact that in the U.S. we have a spectrum crisis. That crisis is everywhere and it's a crisis that is hitting everybody.”

In a May 8 report on the CTIA Wireless conference in New Orleans, The Wall Street Journal noted, “Steve Largent, CTIA’s president, said spectrum was crucial for stimulating the American economy, as wireless services have helped create new jobs and innovations. ‘We simply need more spectrum in a marketplace with more consumer demand,’ Mr. Largent said. ‘More spectrum means more opportunity for you.’”

But regulatory uncertainty exists, including government regulators killing the AT&T/T-Mobile USA deal, and questions about how regulators will eventually come down on the Verizon Wireless $3.9 billion deal to buy spectrum from cable companies. That’s not good for investment, innovation and supply.

Bruce Mehlman, co-chairman of the Internet Innovation Alliance and former Assistant Secretary of Commerce for Technology Policy, summed things up nicely: “Broadband is an invaluable tool that allows entrepreneurs to pull America up by her bootstraps. Yet too many communities are still without high-speed Internet or lack robust service; universal broadband deployment must be a top priority for our nation, and this goal is best met through policies that allow the markets to work. Now more than ever we need more spectrum in the hands of those actually serving our entrepreneurs, to ensure robust and reliable Internet service. Policies that allow the markets to deploy these resources to their highest and best use, rather than politicians’ preferences, will lead to a stronger entrepreneurial ecosystem – that means more innovation, more jobs, more cost-savings for consumers and more start-up businesses in the United States.”

In the end, let the market work, so that entrepreneurs and consumers can reap the full rewards that broadband currently provides, and will offer in the future.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

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