Surest way to create high-paying jobs: flat-rate local phone service 

By Chris Gulker 

The story was a familiar one: a large corporation announced a major "downsizing" that would cost thousands of jobs. The citizenry braced for misery

But, before the ax fell very far, the company's growth caused them to
suspend the cuts: they needed the workers too badly. 

Elsewhere new companies were springing up, others were growing. The
resulting labor shortage drove wages up as companies competed for scarce
workers by offering high pay, profit sharing and other perks. Newspapers
had to add pages to carry all the "help wanted" notices.

Fantasyland? Nope... the United States, circa 1997.

What lead to this employment hothouse? Sound political guidance by
courageous leaders? Brilliant economists? A wise, well-informed populace?

Nope. It was flat-rate phone service, if it was anything.

The deregulation of American phone companies led initially to confused
customers, and bloated former monopolies grumping about the outrage of
actually having to serve customers. Phone companies warned that thousands
of workers would be turned out if they couldn't keep prices high.

Upstarts like Sprint and MCI - telephone companies that were only too
happy to serve you if you'd sign up for their service - drove prices down
and became economic giants in the process.

Prices for local and long distance calls plunged. Basic monthly phone
service fell to about $10 (from around $25) and even high-capacity ISDN
service came down to around $25 (from over $1000) in many parts of the
U.S.

In particular, most locales now offer unlimited local phone calls. It's cheap
and easy to add conveniences like a second phone line for a fax machine or
computer.

Flat rate local calls meant that people who wanted to hook their computers
to online services could do so without surcharges from the phone company.
Rapidly growing online services engaged in price wars, resulting in more
customers signing up.

People bought computers to get online - so many that home purchases of
computers surpassed business computer purchases in 1996 (and more
computers than televisions were sold in the U.S. last year).

The Internet arose, and things got really interesting. By 1996, the largest
maker of Internet routers had passed General Motors in market
capitalization, and it wasn't even first on the list.

Well-paid workers buy things, like homes, ending a decade-long fall in
California real-estate, and cars, leading to record earnings in Detroit, and
yet more jobs.

Is there a moral here for countries like the UK, where high local phone
charges probably restrict the growth of the computer and Internet
industries?

I'll get back to you on that one... I gotta go surf the Net right now.