Mobile Broadband Investment and Job Creation

Creating Jobs and Enhancing America’s Competitiveness through Mobile Broadband Infrastructure Investment

By Fred Campbell, President & CEO, WCAI

The President’s Council on Jobs and Competitiveness is meeting today in Dallas, Texas to discuss how infrastructure investment can create jobs and help America compete in the global economy. The Wireless Communications Association International is pleased that the Council is considering the incredible impact of mobile broadband infrastructure investment on job creation, American competitiveness, and economic growth. Intensive investment in mobile networks significantly increased American growth and prosperity over the last two decades and will in the next decade if government policies continue to promote investment and innovation in mobile infrastructure.

The U.S. is currently the world leader in mobile broadband innovation with the most 3G broadband subscribers and global market share in smartphone operating systems. According to a recent report from Deloitte, the U.S. wireless industry’s contributions to gross domestic product grew by more than 16% per year from 1992 to 2007, while the growth rate for the remainder of the economy averaged less than 3% per year. Despite the recession in 2007 to 2010, the U.S. continued to invest in wireless infrastructure at average level of $20 billion annually. These investments were driven by the availability of spectrum (i.e., airwaves) necessary to deploy third generation (“3G”) wireless networks and a market-oriented approach to wireless regulation that created an “entrepreneurial innovation ecosystem” of mobile infrastructure, devices, software, and content.

Even though today’s 3G networks have only recently been widely deployed, there are still enormous opportunities for additional investment in mobile broadband infrastructure. The rapid consumer adoption of smartphones is producing a wireless data explosion that threatens to overwhelm today’s 3G networks. To cope with exponential growth in mobile data traffic, the wireless industry is beginning to invest in the deployment of fourth generation (“4G”) mobile broadband technologies. Because investment in 4G mobile broadband infrastructure creates jobs, increases U.S. competitiveness, and grows the economy both when the networks are built and when they’re used, every dollar invested in mobile broadband infrastructure adds about three dollars in gross domestic product. Deloitte projects U.S. 4G network investment ranging from $25 billion (the “baseline” case) to $53 billion (the “robust” case) over the next five years, which would add 371,000 to 771,000 jobs in the U.S. and generate $73 billion to $151 billion in gross domestic product growth. The “robust” case assumes the U.S. maintains global leadership in mobile broadband by deploying 4G networks more expansively and quickly than in the baseline case.

Policymakers have a critical role to play in maximizing 4G investment and maintaining U.S. leadership in mobile broadband. Deployment of 4G network technologies on available spectrum is not enough to meet exploding consumer demand for mobile broadband capacity and enable new services that rely on 4G capabilities. Mobile broadband service providers need access to more spectrum to deploy robust 4G networks, but they cannot access the spectrum they need without the permission of policymakers. Given the projected impact of 4G infrastructure investment, authorizing access to more mobile spectrum may be the single most important policy option available to create jobs, enhance American competitiveness, and grow the economy. The best part is that policymakers don’t need to spend any taxpayer money to do it.

Still Waiting for a Reason to Apply Open Internet Regulations to Mobile Broadband

In its comments on the FCC’s recent Public Notice asking whether open Internet regulations should apply to mobile broadband, WCAI explodes the myth that open Internet regulations are necessary to subsidize mobile device and applications makers.
WCAI demonstrates in its comments that the device and applications segment of the mobile market is a hotbed of innovation, competition, and industry growth:

• There are at least 33 companies manufacturing more than 630 unique devices for the U.S. market.
• There are currently 11 companies producing OS for the mobile devices segment, none of whom is vertically integrated with a mobile broadband service provider.



• Entirely new types of devices are being created, including the Apple iPad and the Kind e-reader.
• The mobile applications market is experiencing annualized growth rates of up to more than 500 percent.




The data presented by WCAI clearly indicates that there is intense innovation and competition in the applications and devices segments and that there is no discernable market failure in these segments.

Open Internet proponents nevertheless believe regulations are necessary to ensure applications entrepreneurs can “innovate” without “first seeking the permission” of a network operator. In the absence of some market failure, however, “seeking permission” is merely a euphemism for paying market-based rates for use of the network. And there is no basis for believing that device and applications developers are unable to fully participate in the mobile market.

The argument that mobile network operators should be subsidizing mobile applications providers is nonsensical given the relative entry costs of these two market segments. The cost of entry into the applications market is so low that an entrepreneur can earn a living as an independent mobile software developer working out of the home. In comparison, Clearwire’s entry into the mobile broadband service provider market has required billions of dollars in capital. Given this huge disparity, it seems clear that, if the Commission were to subsidize mobile broadband investment, it ought to subsidize investment in the network – and not in devices and applications.

The Migration to Mobile 4G Networks

By Monica Paolini, Founder, Senza Fili Consulting

Mobile broadband requires operators to change the way they manage data services. The transition to a 4G IP network will give them the tools to manage traffic actively and achieve three goals:

• Increase network efficiency and capacity, lowering transport costs
• Offer service plans that are more flexible, fair, and personalized
• Maximize revenues from subscribers, applications and content providers, and vertical applications

We just published a white paper sponsored by Cisco on the transition to 4G IP networks.

Mobile broadband is a great success story. After several years of timid growth, mobile broadband adoption has exploded, driven by the concurrent availability of must-have devices like the iPhone and Droid, a myriad of applications that are intuitive to use, and attractive service pricing. The sudden growth in mobile broadband is happening at a time when mobile operators are fighting a slow but inexorable decline in voice revenues and see data revenues as their main hope for maintaining their profitability levels.

Yet for mobile operators mobile broadband is a relatively new service that presents many challenges. Despite its simplicity, the flat-fee model-with or without traffic caps-does not meet subscribers' demand for flexible and personalized data services. Network congestion, poor subscriber experience, and the inability to reach new market segments are among the problems that operators have started to encounter as mobile broadband becomes widely adopted in the consumer market.

On the other hand, operators have unparalleled, but largely under-utilized, access to real-time information about their subscribers and their network. They know where their subscribers are and what they are doing, what their preferences and plan settings are, which devices and application they use. They also have real-time information on traffic levels and traffic flow for each cell site, which allows them to decide whether and how to prioritize traffic. By using this information, operators can expand the potential of mobile broadband services, making them available to a wider range of subscribers and devices, while managing traffic growth, providing a reliable and fair service to subscribers, and protecting their profitability.

In our latest paper, we present a case for a more active management of mobile broadband services that leverages the IP network to pursue three goals:

* More efficient use of network resources. This is required in order to expand network capacity to meet subscribers' demand in a cost effective way, which will enable operators to operate profitably.

* More flexible, fair, and personalized service plans. Mobile operators realize they have to move beyond flat-fee unlimited plans. To improve their subscribers' experience and differentiate their services from the competition, they can add features that allow them to move beyond capped plans.

* Maximize revenues. Flat-fee unlimited plans are not effective at segmenting the market and gaining revenues from added-value services, because for many potential subscribers the available plans are too expensive, or do not offer the features they want. A wider choice in service plans can address the demand from these subscribers, and raise data revenues. Furthermore, mobile broadband can create new revenue streams from advertisers and content and applications providers, and facilitate the development of new business models that make mobile data services more attractive, easier to use, and more effective. Mobile operators can also gain additional revenues from vertical applications, through partnerships with MVNOs, enterprises and public agencies.

WCAI Submits Recommendations to Industry Canada on 2.5 GHz Band

WCAI filed comments with Industry Canada advocating the rules to ensure effective and efficient use of the 2.5 GHz band. WCAI recommends that the Canadian regulator: 1) Allocate the spectrum in contiguous spectrum blocks of at least 30 MHz each to meet increasing consumer demand for mobile broadband services; 2) Permit fully flexible use of the spectrum for either TDD or FDD throughout the entire band and allow operators to mitigate any potential interference; and 3) Harmonize to the maximum extent possible its band plan with the band plan in the United States and other countries. “Given the amount of bandwidth available within the 2.5 GHz band, this band is essential to the development of mobile broadband worldwide,” said WCAI President and CEO Fred Campbell. “Implementing the WCAI recommendations would enable Industry Canada to minimize cross-border interference with the United States and promote the rapid and efficient deployment of mobile broadband services in Canada.”

WCAI Files Comments on CMRS Market Competition

Today WCAI submitted comments with the FCC urging the Commission to use more granularity regarding networks operating in unlicensed and “hybrid” (3.65 GHz) spectrum bands when analyzing effective competition in the CMRS market for its annual report. “Coverage maps depicting unlicensed network deployment are essential to understanding wireless deployment and informing the spectrum allocation debate that is currently occurring in the context of the national broadband plan proceeding,” the filing said. “With increasing convergence between licensed and unlicensed networks, and calls for even more unlicensed spectrum allocations, now is the time for the Commission to include such data in the CMRS Competition Report.” WCAI also urged FCC to make significantly more spectrum available for mobile broadband use. The limited amount of 425 MHz available today for mobile broadband would not support even three mobile broadband service providers using 150 MHz of spectrum each to adequately meet consumer needs. Finally, WCAI said the Commission should attempt to quantify the degree to which mobile broadband may be a substitute for wireline broadband to understand whether consumer preference for mobility is affecting intermodal broadband competition.