Article 43


Tuesday, May 17, 2005

Book - Racing To The Bottom

How Antiquated Public Policy Is Destroying the Best Jobs in Telecommunications

Current telecommunications public policy is destroying some of the best jobs in America, jobs that afford non-college graduates the opportunity to earn decent pay and benefits, enjoy stable employment and advancement through training, and secure basic workplace rights and representation. Federal and state economic regulation and taxation of the long-established telecommunications carriers have tilted the competitive advantage toward local carriers such as cable television and wireless, which offer employees inferior conditions of employment. This competitive advantage is not based on productivity, service quality, or underlying access costs, but arises primarily from higher government-mandated costs imposed on established carriers, particularly the former Bell companies. In this regulatory environment, wireless and cable TV carriers are advantaged in ways that have damaged the industry and its employees:

The traditional wired or “wireline” telephone carriers have eliminated 15.5% of their jobs since 1998; these jobs paid at least 26% more than comparable work in the cable industry, where lower-wage employment increased 22.6% between 1998 and 2003.

Turnover, in the form of layoffs, dismissals, and quits, is 10 times higher in cable than among the traditional Bell incumbent local exchange carriers (ILECs).

The Bell ILECs provide significantly more training for their employees than all other communications providers, including more than twice the qualifying training offered by cable television providers, four times the amount provided to technicians by wireless companies, and more than three times the amount provided to service representatives by wireless companies.

Unions represent 96% of technicians and 77% of service representatives at the Bell ILECs, a share that is more than double the average rate of any other telecommunications provider. This high rate of unionization leads to improved job quality, better skills acquisition, less turnover, and more stable and productive workplaces at the Bell providers relative to other carriers.

Tax policy heavily discriminates against the Bell as well as the independent ILECs. Taxes as a share of gross revenue range from a high of 17.9% for traditional telephone service to 4.5% for cable franchises and 0% for broadband services, including Internet phone services, the newest competitor to the Bell ILECs.

As communications platforms increasingly compete to deliver comparable services, tax and regulatory policies favor cable companies. The United States must create a level playing field for all players in the voice and data communications markets to protect the most vulnerable consumers and support the creation of good jobs for working Americans in these critical high-tech industries.


Less than 10 years after passage of the 1996 Telecommunications Act, which established a federal policy of promoting competition in telecommunications services, vigorous competition has emerged among wireline, wireless, and cable television companies, each of which uses a different technology to provide local access to services such as voice calling and Internet connectivity. Historically, “local exchange carriers” (LECs) such as the Bell companies or independent telephone companies like Alltel or the former GTE provided publicly switched wireline access for voice communications. These providers held a monopoly over “the last mile” the two-way transmission lines connecting each home or office to the larger telecommunications network. Since the passage of the act, however, new firms have entered the local market as competitive local exchange carriers (CLECs), offering alternative wireline access. Wireless providers such as T-Mobile, Sprint PCS, and Cingular now offer affordable and convenient substitutes to wireline services. And major cable TV companies such as Comcast and Time Warner have entered the telecommunications market with voice and high-speed Internet services. At the same time, the cable TV monopoly over one-way distribution lines for cable television has eroded. Now satellite television provides alternative access, and the traditional telephone companies are deploying new broadband technologies to offer television and video-on-demand. In sum, new technologies, massive capital investments, and changes in public policy over the last decade have created alternative ways for customers to access local voice, Internet, television, and multimedia services.

However, a consequence of current telecommunications policy in this changing technological and business climate is the destruction of high-quality jobs in the industry jobs that afford non-college graduates the opportunity to earn decent pay and benefits, to enjoy stable employment and advancement through training, and to secure basic workplace rights and representation. Federal and state economic regulation and taxation of the incumbent carriers have tilted the competitive advantage toward cable TV and wireless carriers, which offer employees inferior conditions of employment. This tilt is not based on productivity, service quality, or underlying access costs, but arises primarily from the higher government-mandated costs imposed on the long-established, incumbent carriers, particularly the former Bell companies.

In this report, we examine the quality of jobs and employment conditions for the two largest occupational groups in this industry: technicians and customer service representatives. To do so, we draw on a unique survey of general managers in a nationally representative sample of 327 establishments in the industry (see Batt, Colvin, Katz, and Keefe 2000, 2004). Chapter 1 examines overall trends in growth, employment, and productivity across wireline, wireless, and cable TV providers. Chapter 2 shows how the quality of jobs, defined as the level of compensation, stability of employment, access to training and job skills, workplace rights and representation, and the quality of the work environment, varies across these providers. Chapter 3 explores the role of unions in creating goods jobs in the industry. In Chapter 4, we develop employer report cards that identify the best and worst workplaces for technicians and service representatives. Finally, Chapter 5 assesses how public policy is destroying the best jobs in the industry and what can be done to reverse this trend. review

While cell phones, high-speed Internet access, interactive cable, and satellite TV services have become commonplace features of the new century, telecommunications policy remains an antiquated remnant of the old one. The former Bell companies, which compete to provide the state-of-the-art services we have come to expect from telecommunications providers, continue to pay taxes and are mired in regulation as if they were still public service monopolies. In the meantime, post-deregulation wireless companies, cable TV, and Internet providers pay a much smaller share of their revenue in taxes, if they pay any at all and are lightly regulated.

More is at stake than a corporation’s profits: the businesses hit hardest by taxes are also the firms offering the highest-paying and best quality jobs to the nation’s workforce. And as these firms lose ground to their deregulated competitors, some of the best jobs in America are disappearing.

The unintended consequence of federal and state telecommunications policy is to support the worst employers with favorable tax and regulatory treatment, while greatly disadvantaging good employers and their workers and unions. The FCC and Congress need to re-examine current telecommunications policy and create a level playing field to encourage competition across the growing number of traditional and innovative access technologies that make up U.S. telecommunications.

About the Author
Jeffrey H. Keefe is an associate professor in the School of Management and Labor Relations, Rutgers University, New Brunswick, N.J. He is also director of the Telecommunications Program at the Economic Policy Institute in Washington, D.C.


Posted by Elvis on 05/17/05 •
Section Telecom Underclass
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