Monthly Labor Review July 2006 27

Telecommunications Employment

Cutting the cord: telecommunications

employment shifts toward wireless

The telecommunications industry employment rapidly grew

in the late 1990s into early 2001;

ever-changing technology, advances in wireless technology,

and declining profits resulted

in the telecommunications bubble bust

Christopher C.

Carbone

Christopher

Carbone is an

economist in the

Office of

Employment and

Unemployment

Statistics. E-mail:

carbone.christopher

@bls.gov

The telecommunications industry experienced unprecedented employment gains inthe latter half of the 1990s and into early

2001, growing by 36 percent from January 1996

to March 2001.1 This fast-paced growth was fueled largely by changes in Federal regulation, the

anticipated demand for telecommunications products associated with those changes, and with rapidly developing technology. The subsequent employment downturn, one signal of the end of the

“tech boom,” was large and quick. The industry

as a whole regrouped and changed its focus to new

and emerging technologies as consumer demand

for telecommunications services shifted from

traditional land-line based services to emerging

wireless services. Telecommunications shed 25.3

percent of its employees from the March 2001 peak

through 2005. (See chart 1.) This employment bust

took only 4 years, about a year less than the employment boom. This article details the telecommunications industry’s growth and subsequent bust.

Anticipating deregulation

Throughout the early 1990s, telecommunications

employment growth was nonexistent. In fact,

employment declined by 43,000 or 4.4 percent

between January 1990 and August 1993. (See

table 1.) Wired telecommunications was the driving force behind the employment loss, while telecommunications resellers also lost jobs. In contrast, the wireless telecommunications industry

added 25,000 employees to their payrolls and

cable and other program distribution added 7,000

employees.

Anticipation of changes to telecommunications

regulations had begun by mid-1993, and employment trends began to reflect the expected changes.

From August 1993 through December 1995, just

prior to the passing of the Telecommunications Act

of 1996, employment recovered to near its January 1990 level. The gain, however, was concentrated within the wireless industry. Wired telecommunications payroll employment continued to

decline and would not experience a notable increase until 1997, in the wake of the Telecommunications Act.

Prior to the Telecommunications Act, the

telecom industry could be characterized as having

only a few large firms providing services in local

monopolies. Local telephone service was generally offered by a lone regional provider, usually

one of the “Baby Bell” companies like BellSouth

or Verizon. Long distance services were supplied

by a limited number of national carriers, such as

MCI, AT&T, and Sprint. The wireless industry mirrored this structure with services provided by large

national carriers such as Cingular or Verizon Wireless.2

 These companies were rather specialized,

focusing mainly on one form of telecommunica-
Telecommunications Employment

 28 Monthly Labor Review July 2006

 Table 1. Telecommunications employment change by industry and time period, 1990–2005

Telecommunications

Employment change ........................... –43,000 36,000 352,000 –337,000 8,000

Percent change ................................... –4.4 3.8 36.0 –25.3 0.8

Wired

Employment change ......................... –57,000 –24,000 151,000 –241,000 –170,000

Percent change ................................. –8.4 –3.8 25.2 –32.1 –25.0

Percent of telecom employment ....... 66.1 61.3 56.5 51.4 –14.7

Wireless

Employment change ......................... 25,000 43,000 103,000 –8,000 163,000

Percent change ................................. 74.8 75.1 102.0 –3.8 494.5

Percent of telecom employment ....... 6.1 10.3 15.3 19.7 13.6

Resellers

Employment change ......................... –11,000 –1,000 53,000 –92,000 –51,000

Percent change ................................. –6.0 –.5 31.0 –41.4 –28.1

Percent of telecom employment ....... 18.1 17.3 16.7 13.1 –5.0

Cable

Employment change ......................... 7,000 15,000 38,000 5,000 66,000

Percent change ................................. 10.8 20.3 41.6 4.0 96.4

Percent of telecom employment ....... 8.1 9.3 9.7 13.5 5.4

Early 1990s

(January 1990–

August 1993)

Anticipated

deregulation

(August 1993–

January 1996)

Boom

(January 1996–

March 2001)

Bust

(March 2001–

December 2005)

Industry Net change

Chart 1. Telecommunications employment, 1990–2005

Thousands,

seasonally

adjusted

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05

800

900

1,000

1,100

1,200

1,300

1,400

800

900

1,000

1,100

1,200

1,300

1,400

Thousands,

seasonally

adjusted

NOTE: The large drop and subsequent rebound in telecommunications employment in August 2000 and September 2000 reflect a

strike of 87,000 workers who were off establishment payrolls in August and returned in September.
Monthly Labor Review July 2006 29

tions service. This structure is evidenced by the distribution

of long distance revenues amongst providers. In 1996, more

than 68 percent of industry revenues were distributed among

only three carriers. (See chart 2.)

The Telecommunications Act of 1996

The Telecommunications Act of 1996 greatly influenced

employment in the telecommunications industry after its enactment. The change in regulatory policy was the first major

overhaul to communications laws in 62 years. The main goal

of the Act was to “let any communications business compete

in any market against any other.”3 It was widely believed

that by opening telecommunications markets up to competition, consumer prices would fall.

Technological advances in fiber optic cable dramatically

increased data transmission capacity and coincided with the

passage of the Act. Over the past decade, fiber optic transmission capacity has grown by a factor of 200. Average fiber

capacity in 1996 was about 10 gigabytes per second. By

1998, the figure had increased tenfold to 100 gigabytes per

second.4

 Also, new technologies allowed more efficient

transmission of wireless signals over the frequency spectrum

allotted by the Federal Communications Commission (FCC).

When coupled with the prospects of a deregulated market

Chart 2. Percentage of toll service revenue by provider, 1996 and 2004

SOURCE: Federal Communications Commission.

Sprint

All o

Other incumbent local

telephone companies (11.3)

MCI

(21.0)

AT&T

(39.5)

Sprint

(8.0)

All other toll

service

providers

(20.2)

1996 2004

AT&T

CI

uth

Qwest

All o

AT&T

(33.7)

MCI

(16.6)

Sprint

(8.4) All other toll

service

providers

(20.1)

BellSouth

(2.5)

Qwest

(5.8) SBC

(6.7) Verizon

(6.2)

and rising Internet usage, investment in telecommunications

took off, and the employment boom began.

Investment in fixed assets by the telecommunications industry increased dramatically from the mid-1990s until peaking in 2000.5

 These assets included fiber optic cables, which

conduct guided transmission of light, and wireless cell sites,

which transmit wireless signals to wireless devices. It was

believed that fiber optic cables would be used to transmit the

majority of data for the growing Internet population.6 New

wireless towers, or cell sites, were necessary to keep companies competitive by providing better signal coverage. Prior

to the Act of 1996, annual fixed asset investment by telecommunications companies was modest, with only $53 billion

invested in 1993. (See chart 3.) Investment increased in anticipation of the passage of the Act, and by 1996 had reached

$70.7 billion. Investment increased even more rapidly after

the new regulations were passed, nearly doubling the 1996

dollar figure and reaching a peak level of $136.6 billion in

2000.7

 The number of cell sites skyrocketed from 30,045 in

December 1996 to 175,725 by the end of 2004.8

Along with the rapid rise in investment came a sharp increase in hiring. As seen in chart 1, employment within the

telecommunications industry as a whole rose by 36 percent

with the addition of 352,000 jobs from the beginning of 1996

until the employment peak in March 2001. Wired telecom-
Telecommunications Employment

 30 Monthly Labor Review July 2006

munications employment increased by more than 25 percent

during this period, while the number of jobs in wireless telecommunications more than doubled. Telecommunications

resellers and cable and other program distribution also added

jobs.

The employment bust

Fears of a telecom bubble were realized when, following the

telecommunications employment peak in March 2001, the

industry began to shed jobs rapidly. Chart 1 shows that by

the end of 2004, employers had cut more than 300,000 jobs.

More than two-thirds of those cuts occurred within the wired

telecommunications industry. Overbuilding, increased competition, and shifts in technology contributed to the large

employment declines.

The current capacity utilization rate of the fiber optic cable

laid in the 1990s has been estimated at a mere 5 percent.9

The realized demand for fiber capacity was much less than

anticipated, largely because of the emergence of wireless

technology that could be substituted for the traditional wired

service.

Traditional wired services have become more easily replaced by wireless services. Unlike in the early days of wireless when most users relied on pagers and bulky, unreliable

car phones that were often permanent installations in a vehicle, today’s wireless technology is increasingly reliable,

clear, and offers a growing variety of features. Increased

reliability of service has led to larger numbers of “wirelessonly” consumers who have no landline telephone. New features of wireless phones allow users to send e-mail, take pictures, and even watch television broadcasts.

Increased competition, especially among long distance

carriers, also contributed to the decline of the telecommunications industry. Chart 2 shows that while the largest three

providers enjoyed a large share of the toll revenues in 1996,

by 2004, the number of providers capturing more than 1 percent of total revenues more than doubled to seven. In 1996

when the Telecommunications Act was passed, there were

approximately 3,800 interstate telecommunications providers offering State-to-State long-distance service. When employment in the industry peaked in 2001, this number had

risen by nearly 50 percent to approximately 5,700.

New long distance providers, namely the so-called “10-

10 numbers,” flooded the market. Consumers were bombarded with TV and radio commercials advertising substantial savings over traditional long-distance carriers. 10 These

changes signaled that one of the main goals of the Telecommunications Act, increased competition, had been accomplished. Along with the increased competition came a

Chart 3. Telecommunications industry investment in fixed assets

Billions

of dollars

Billions

of dollars

SOURCE: Bureau of Economic Analysis.

1993 94 95 96 97 98 99 2000 01 02 03 04

0

20

40

60

80

100

120

140

0

20

40

60

80

100

120

140
Monthly Labor Review July 2006 31

decrease in long distance rates, which in turn cut revenue. In

fact, average revenue per minute for interstate toll calls,

which are calls from one State to another, fell from 15 cents

in 1993 to 8 cents in 2001.

The drop in long-distance revenues for wired carriers was

further amplified by a drop in long-distance usage. Wireless

usage was on the rise, and the introduction of free long distance for many wireless plans lured consumers away from

their traditional wired long-distance services. The estimated

number of wireless subscribers more than quadrupled from

44 million in 1996 to 182 million by the end of 2004.11 Industry revenues also reflected this shift in usage. Wireless

revenue increased by more than 750 percent, from 10.2 billion dollars in 1993 to more than 88 billion dollars in 2003.

During this same time period, long distance revenue fell by

67 percent to 4.3 billion dollars, down from 13.0 billion dollars. By 2000, the average annual household expenditure on

wireless service surpassed the average long-distance expenditure. (See chart 4.) In the second quarter of 2004, consumer

spending on wireless services surpassed spending on all traditional wired services combined for the first time ever, further

evidence of consumers’ shift towards wireless technology.12

All of these factors combined to facilitate the employment

losses that began in 2001 and continued through early 2005,

as seen in chart 1. In 2001 alone, 77 telecommunications

companies filed for bankruptcy, up from just 20 in 2000.13

Job losses began in April 2001 and continued through 2005.

As the year ended, employment levels within the industry

were about 337,000 below the peak level seen in March 2001.

The two major components of the telecommunications industry, wired carriers and wireless carriers, fared very differently during the employment downturn. (See chart 5.) Wired

telecommunications carriers experienced the majority of telecommunications job losses since the industry’s employment

peak. These losses represented a 32.1 percent drop in employment and can largely be attributed to increased competition and consumers shifting towards wireless technology. In

2005, employment in the wired telecommunications industry

appeared to stabilize as the loss of jobs decelerated. Employment levels at the end of 2005 were below those in 1995

prior to the Act. In contrast to wired telecommunications,

wireless experienced relatively fewer job losses during the

2001–05 period. As 2005 came to a close, wireless employment stood below its peak level by a comparatively modest

7,800, or 3.8 percent.

The current evolution

The telecommunications industry is expected to continue

evolving along with technology and demand for its products.

Chart 4. Average annual household telecommunications expenditures by type of provider

Dollars Dollars

SOURCE: Federal Communications Commission.

1995 96 97 98 99 2000 01 02 03

50

100

150

200

250

300

350

400

450

500

50

100

150

200

250

300

350

400

450

500

Long distance

Wireless
Telecommunications Employment

 32 Monthly Labor Review July 2006

Consumer demand for wireless services is still on the rise.

For example, universities across the country are evaluating

plans to eliminate traditional land-line services to residence

halls, and some are even providing students with mobile

phones that include long-distance options.14 A 2003 survey

of wireless phone users estimated that 21 percent of consumers with cell phones were considering ending their home landline service. Furthermore, “A quarter of the ‘tech elite,’—

the 31 percent of Americans who rely heavily on computers,

cell phones, personal digital assistants and other gadgets—

said Internet use has decreased their usage of traditional

phones.”15 The service-penetration rate (the percentage of

households with service) for wireless service has reached 70

percent. In 2005, Intel announced that it was working with

several wireless communications carriers to create a chip that

can pick up “WiMax” transmissions, which can carry longrange, high-speed wireless data more than 20 miles.16 In

2004, more than 64 million wireless network connectivity

systems (Wi-Fi) were expected to be sold, up from just 24

million in 2002. The industry also anticipates that the number of homes with wireless Internet connectivity will surge in

coming years from an estimated 8.7 million in 2004 to 28

million in 2008.17

The wired telecommunications industry has undergone

restructuring and consolidation in recent months. Several

large mergers point to this consolidation—SBC acquired

AT&T, and Verizon is in the process of acquiring MCI.

18 Overall, the wired telecommunications industry trend is one of

back-tracking to a pre-1996 structure, with several large companies instead of many smaller establishments. In contrast,

the wireless industry has remained comparatively stable over

the past 2 years, with employment remaining little changed

since early 2003. Further evidence of the shift towards wireless technology can be found in the distribution of telecommunications employment. Table 1 shows that in January

1996, wired telecommunications accounted for 61.3 percent

of employment, while wireless telecommunications accounted for just 10.3 percent. By December 2005, the percentage of total employment had shifted—wired telecommunications’ share had decreased by nearly 10 points to 51.4

percent, while wireless’ share of total employment had increased nearly 10 points to 19.7 percent.

THROUGHOUT THE LATE 1990S AND INTO 2000, the telecommunications industry experienced unprecedented growth. Fueled by prospects of new profits and increasing demand for

telecommunications services in the wake of the Telecommunications Act of 1996, establishments entered the market and

rapidly built up network infrastructure along with their

workforce. This infrastructure was overbuilt and realized

Chart 5. Wired and wireless telecommunications carriers employment in thousands, seasonally

adjusted

Wireless

employment

(thousands)

Wired

employment

(thousands)

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05

0

50

100

150

200

250

300

500

550

600

650

700

750

800

Wired

Wireless
Monthly Labor Review July 2006 33

demand for services fell short of expectations. Ever-changing technology, an increasing substitution of wireless technology for traditional land-line services, and declining profits combined, resulting in the telecommunications bubble

burst. Substantial job loss within the industry, most notably

9

 “Jobs, cash gone,” Associated Press, on the Internet at http://

archives.cnn.com/2002/TECH/biztech/12/10/miles.cable.ap/.

10 Special 10-10 numbers are dialed by consumers prior to placing a

long-distance phone call to override a landline’s default long-distance carrier and allow a third party to provide and charge for long-distance service.

11 CTIA–The Wireless Association, Semi-annual Wireless Industry Survey, available on the Internet at http://ww.ctia.org.

12 TNS Telecoms, “Wireless Spending Overtakes Wireline,” available

on the Internet at http://tnstelecoms.com/press-10-20-04.html.

13 Thomas K. Crowe, “The Telecom Meltdown...Looking for the Underlying Reasons,” available on the Internet at http://www.stcconsultants.

org/THE%20TELECOM%20MELTDOWN.htm.

14 Susan Kinzie, “Colleges’ Land Lines Nearing Silent End,” The Washington Post, Feb. 12, 2005.

15 Yuki Noguchi, “Study: 21% of Cell Phone Users Weigh Ending Home

Service,” The Washington Post, Nov. 24, 2003.

16 Matt Richtel, “Intel’s New Chip is Meant to Give Wireless Internet

A Longer Reach,” New York Times, Apr. 18, 2005.

17 Rebecca Lieb, “Wi-Fi Moves In,” Oct. 4, 2004, available on the

Internet at http://www.clickz.com/stats/sectors/wireless/article.php/

3416331.

18 Grant Goss, “Study: Telecom mergers will raise costs to businesses,”

June 14, 2005, available on the Internet at http://www.infoworld.com/

article/05/06/14/HNtelecommergers_1.html.

within wired telecommunications, offset much of the prior

employment buildup. Today, the industry is still struggling

to recover, with employment continuing to decrease as establishments merge and consolidate, technology improves,

new products are introduced, and consumers shift demand.

Notes

1

 Data on employment used in this article are from the Current Employment Statistics (CES) program, which surveys 160,000 nonfarm businesses representing about 400,000 establishments monthly. For more information on the program’s concepts and methodology, see BLS Handbook of Methods, Bulletin 2490 (Bureau of Labor Statistics, April 1997),

Chapter 2 on the Internet at http://www.bls.gov/opub/hom/homch2_

a.htm. CES data are available on the Internet at http://www.bls.gov/ces/.

Data used in this article are seasonally adjusted unless otherwise noted.

2

 The Federal Communications Commission (FCC). For more information on the FCC and regulated wired and wireless telecommunications carriers, visit http://www.fcc.gov.

3

 For more information on The Telecommunications Act of 1996, visit

http://www.fcc.gov/telecom.html.

4 A Brief History of Fiber Optic Technology, available on the Internet

at http://www.fiber-optics.info/fiber-history.htm.

5

 While some investment likely occurred as a result of year 2000 system upgrades, most literature indicates that the investment supported new

technology.

6

 “Jobs, cash gone, but fiber cables remain,” Associated Press, Dec.

10, 2002, on the Internet at http://archives.cnn.com/2002/TECH/biztech/

12/10/miles.cable.ap/.

7

 Bureau of Economic Analysis. For more information on the Bureau

of Economic Analysis, visit http://www.bea.gov.

8 CTIA–The Wireless Association, Semi-annual Wireless Industry Survey, December 1985–December 2004, available on the Internet at http://

www.ctia.org.