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Tech Industry

No recovery for the Internet

US Internet Industry Association CEO David McClure says the sector has fallen victim to incoherent, conflicting and threatening government policies.

Lost in all the good news about the economic recovery is a chilling fact: The recovery isn't being felt by the Internet industry. According to the Bureau of Labor Statistics (BLS), nonfarm employment rose by 126,000 in October, roughly the same increase as in September.

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But manufacturing jobs fell 24,000 in October, led by yet another decline in computer and electronics-related manufacturing. We lost 6,600 of these jobs, including 2,300 for computer equipment, 700 for communications equipment, 4,100 for semiconductors and 200 for electronic instruments.

The service side of the industry did not fare much better. Jobs in the services sector of the IT industry fell by 8,000 from the previous month, led by a decline of 3,400 jobs for telecommunications services.

The Internet industry, which once led the economy and set new levels of productivity for the nation, is stagnant.
The Internet industry, which once led the economy and set new levels of productivity for the nation, is stagnant. The stagnation is due primarily to the incoherent, conflicting and threatening policies of the federal government.

At the Federal Communications Commission, regulators are still whimsically pretending that broadband carried over a cable company's copper wire should be treated differently than broadband carried over a telephone company's copper wire. Wireless Internet is barely considered at all; satellite Internet is ignored; and policies that could spur investment in voice over Internet Protocol may finally get some consideration--next year.

After years of concerted effort, there is still no national policy for the release of broadband.
Internet policy is an even bigger mess in Congress. After years of concerted effort, there is still no national policy for the release of broadband or for the protection of private information on the Internet. Efforts to cut away unnecessary regulation and spur investment are hopelessly stalled. The U.S. Congress did finally manage to pass a spam bill--after more than five years of flailing--but only with drastic modifications.

And it is about to get worse--much, much worse. A handful of senators have blocked passage of an extension to the Internet tax moratorium, putting every Internet subscriber at risk for billions of dollars in new and predatory taxes from state and local governments. New taxes can now be levied on Internet access, broadband equipment and connections, e-mail, instant messaging and even downloads.

When this happens, the magnificent economic machine that is the Internet will slowly grind to a stop, as companies and consumers cut back their use of the Internet, service providers go bankrupt under the crush of tax compliance from 7,200 taxing authorities and the dream of a connected America is quietly killed by state and local tax commissars.

It's not too late. Congress still has time. But it will only act under pressure--and only when the calls for action become a roar. The message is simple--pass the permanent extension to the moratorium on taxation of Internet access. Pass a national antispam law. Deregulate the Internet. Create a national policy on broadband. Do it now.

It falls to us to see that the message gets delivered.