In his recent State of the Union speech, President Obama called for the expansion of high-speed wireless services throughout the U.S. to meet the ever-increasing demand of consumers and businesses. With his stated intention to provide wireless service to 98% of the U.S. population, we at MTAM thought it would be interesting to look at the potential impact on the U.S. economy, and the resulting impact on Michigan’s economy, if that goal is achieved.
In a 2010 speech at the New America Foundation where he spoke on the President’s Spectrum Initiative, Larry Summers, head of the National Economic Council, spoke about the need for increased spectrum stating, “demand is for wireless broadband, which is growing at an exponential rate with the spread of smartphones, netbooks, and wireless-enabled devices. We also recognize that providing unlicensed spectrum – free for anyone to use – has spurred considerable innovation, from Wi-Fi to cordless phones.”
He further indicated, “Broadband and wireless communications make a critical contribution to the economy. Their contribution is especially important because the growth of our economy is, by definition, only as strong as the average growth in each sector. By building our strength in leading sectors, we can drive up that average and bring the rest of the economy with it. To appreciate this point, consider what wireless has already contributed to our economy:
- Before the first spectrum auctions in 1993, 54,000 people were employed in the wireless industry. Today, that number is 268,000.
- The industry association estimates that another 2.4 million American jobs are directly or indirectly dependent on the U.S. wireless industry. And just about every job benefits from mobile technologies through increased productivity and living standards.
- Economic studies have found that the introduction of 1G and 2G cell phones have generated $80 to $150 billion a year in lower prices and better products.”
Further, Summers confidently indicated, “4G wireless technology promises to bring significant economic benefits in two broad categories:
- First, the substantial capital expenditures associated with developing 4G networks will generate significant job creation. Each dollar invested in wireless deployment is estimated to result in as much as $7 to $10 higher GDP. With major American wireless firms spending $10 billion and rising on these efforts, the benefits for job creation and job improvement are likely to be substantial.
- Second, the effects on the larger economy. The number of mobile broadband users in the United States is expected to increase by 75 percent from 2009 to 2013. Combined with increases in speed and functionality, the economic implications ahead are likely to be profound.”
Summers believes that the growth of wireless broadband will result in entirely new categories of jobs, stating, “just like those who knew about the Internet would never have predicted 800,000 jobs created by eBay and those who knew about smartphones would never have predicted the thriving industry in the creation of apps.”
Several global studies on this topic also indicate positive results from wireless broadband expansion, for example a recent study by Vodafone (a global telecommunications company headquartered in London) indicated:
- A World Bank report in 2009 found that a 10% increase in high speed connections leads to a rise of 1.3% in economic growth;
- Internet access together with a population with ICT (information and communications technology) knowledge improves a country’s business environment and global competitiveness through digital infrastructure, improved human capital and increases in labor productivity, all of which attract inward investment;
- Businesses benefit from Internet access and e-commerce as it connects them directly to their consumers, while giving them access to new consumer markets worldwide. Internet increases entrepreneurship by making it easier to form new businesses – this will help employment and government tax revenues. The Internet also increases business profits by improving efficiency, productivity and communications, while encouraging innovation and Research and Development (R&D);
- The Internet provides consumers with a valuable tool for information, empowering them with knowledge, while access to online markets increases competition and improves prices;
- The Internet enables e-government which will improve the delivery of public services and reduce corruption;
- Services such as healthcare will benefit from the Internet by improving information and efficiency, thus reducing costs;
- Internet access will narrow regional divides especially between rural and urban areas. For example, the Internet helps the agricultural sector in developing countries by giving famers access to information and market prices. This in turn raises profits and incomes;
- It enables flexible labor markets as Internet connectivity improves home/work life balances. This is particularly important in aging countries that are looking to increase birth rates;
- The Internet speeds up the globalization process by reducing physical barriers. Many businesses are able to reduce travel costs as online communication has improved. The global economic downturn of 2008-2009 led to many companies cutting travel budgets and IT solutions have enabled this. This will prove invaluable at times of crisis such as when European airspace was closed down in April 2010 owing to volcanic ash from an eruption in Iceland.
These changes are already occuring. In advanced economies, the number of fixed-telephone lines has been declining, dropping by 7.2% in Western Europe, for example, over 2004-2009 and the downward trend is expected to continue. In the U.S., as of June 2010, over 24% of households are already mobile phone-only.
Studies indicate that consumers will upgrade mobile phone handsets in pursuit of instant wireless Internet access and the rise in popularity of smart phones. More laptops and notebooks will also encourage the spread of wireless Internet.
Therefore, based on Summers’ predictions that increased availability of wireless spectrum will drive increased use of mobile devices, and that increased use of mobile devices drives econonic growth, it is logical to conclude that the President’s initiative will be positive for the economy.
So what does this mean for Michigan?
Michigan has already begun the journey of becoming a leader in the mobile technology industry. With increased expansion of efforts in this area we are likely to see increasing numbers of sustainable, good-paying jobs, opportunities to slow the rate of brain-drain caused by the departure of our youngest and brightest from the state, significant growth in entrepreneurial activities related to the mobile industry, and many opportunities for re-training those down-sized from other industries who can now find opportunities for exciting new careers in the mobile industry. All of this leads to the conclusion that achieving the President’s goal will lead to positive economic growth for Michigan.