MOBILE COMMUNICATIONS: ECONOMIC AND SOCIAL IMPACT Gerald R. Faulhaber

Wireless Technologies: Enabling Innovation and Economic Growth

4/17/2009

Georgetown Wireless

Slide 1

The Pernicious Rise of Cell Phones • The Popular View in the US is that pervasive mobile telephony is the bane of civilized society – People talking on cell phones in public spaces are rude and annoying:

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How Can We Cope? • How about this…

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Kids – way too much talking

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Health? • Ongoing fears of brain damage

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Auto Safety?

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Family Life?

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Have we forgotten how to relax?

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If Mobile Phones are so bad… • …then why do we buy and use them? • Early cell phones were expensive, big, and few (rich) people bought them. – A minority that we could all loath

• Today, cell phones are ubiquitous, yet we still complain bitterly about their negative effects • But something must be good about them…we all buy and use them 4/17/2009

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Standard Reaction to New Mass Technology • Similar concerns when television introduced in late 1940’s – – – –

Bad for the eyes Turns kids into vegetables “Vast wasteland” of vulgar culture, undermining high culture Even increased teen pregnancy (recent)

• Concerns over the Internet – Increased child pornography – Divert people from face to face interaction – Increase sexual predator behavior

• New technology, especially successful technology, raises lots of concerns. 4/17/2009

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Slide 10

The US Picture-Subscriber Growth 243,428,202

250,000,000

219,652,457 194,479,364

148,065,824 134,561,370

150,000,000

118,397,734 97,035,925 76,284,753

48,705,553 38,195,466 28,154,414 19,283,306

Jun-08 Jun-07 Jun-06 Jun-05 Jun-04 Jun-03 Jun-02 Jun-01 Jun-00 Jun-99 Jun-98 Jun-97 Jun-96 Jun-95 Jun-94

1,608,697

2,691,793

4,368,686

6,380,053

8,892,535

Jun-87

Jun-88

Jun-89

Jun-90

Jun-91

Jun-92

Jun-93

883,778

Jun-86

13,067,318

500,000

Jun-85 50,000,000

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203,600 0

60,831,431

100,000,000

169,467,393

200,000,000

262,720,165

300,000,000

The US Picture – Voice Minutes

2,200 2,000 1,800 1,600

Billions

1,400 1,200 1,000 800 600 400 200 0

1991

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1992

1993

1994

1995

1996

1997

1998

1999

2000

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2001

2002

2003

2004

2005

2006

2007

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The US Picture – Price v Volume $0.50

800

$0.45

700

$0.40

Monthly Minutes of Use

Minutes of Use Per Month

$0.35 500

$0.30 $0.25

400

$0.20

300

$0.15 200

Average Revenue Per Voice Minute

600

$0.10 100

$0.05

Revenue Per Minute

0

$0.00 1994

1996

Source: FCC 12th CMRS Report

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1998

2000

2002

Minutes of Use Per Month

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2004

2006

Average Revenue Per Voice Minute

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The US Picture – Wireless v Wireline 450,000,000

400,000,000

350,000,000

32,033,915

33,975,336

29,896,109

238,229,953

26,985,345

217,418,404

21,644,928

192,053,067

17,274,727

167,313,001

11,557,381

147,623,734

200,000,000

114,028,928

90,643,058

250,000,000

130,751,459

300,000,000

28,711,461

150,000,000 179,822,123

187,554,423

188,465,144

185,502,928

179,981,490

173,031,945

165,946,706

157,039,893

100,000,000

Jun-00

Jun-01

Jun-02

Jun-03

Jun-04

Jun-05

Jun-06

Jun-07

50,000,000

0

USAC ILEC Line Counts

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CLECs

W ireless

Slide 14

The US Picture • Wireless-only adults (6/08) = 17.5% – Growth rate = 45%/year

• Still considerably behind Korea and Japan in 3G – Less penetration than EU

• But surely other technologies have done as well or better…TV, PCs, broadband… • More mobiles than TVs (235M), Internet users (230M), PCs (220M), and broadband (80.2M) 4/17/2009

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US Picture – Data Services • Fastest Growing Segment of Mobile – Migration of Internet/e-mail/TV/etc. to mobile – 68% BB adds in 2007 were mobile. Is mobile the future platform of choice? 60 55

3G Subcribers (in Millions)

50

40

38

30

22 20

10 10 3 0 Dec-05

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Jun-06

Dec-06

Jun-07

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How about the rest of the world? • Mobile’s biggest impact has been on the less developed world – Has brought connectivity as well as mobility – Low barriers to entry – Leapfrog over wireline technology

• Active mobile phones = 4.2 billion, 61% of the world’s population – wireline never exceeded 20% penetration – PC penetration = 8.5%, Internet users = 20%, broadband 5.4% 4/17/2009

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India (for example) • 300 M subscribers today, growth rate = 42% • Aggressive deployment in rural areas – “Candlebox”: wireless webtop device to access Internet over cell network

• Individual stories – Babu Rajan, Kerala fisherman, has tripled his income due to better market communications and bargaining power; customers better off as well – Devi Datt Joshi, New Delhi grocer, has almost tripled his income, with improved information on supply and demand in his market – Bangladeshi villagers use wireless to connect to the Internet, find medical help otherwise unavailable 4/17/2009

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And Elsewhere • In Phillipines, wireless texting used for political action (Joseph Estrada, 2001) • In Congo, staying in touch with family in wartorn country, getting medical help, even paying bills with m-currency • Wireless banking in Phillipines (G-cash), Africa • Grace Wachira, Kenya clothing producer: “I’m saving time and saving money” 4/17/2009

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…and More • In Rwanda, leveraging scarce medical resources using mobile phones to access medical records in outlying villages (solar power) • 90% of phones in Africa are mobile; penetration is 28 per 100 pop, and over 85% of Africans have a cell tower within reach. • "The cell phone is the single most transformative technology for development" Jeffrey Sachs 4/17/2009

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Is There Any Hard Evidence? • Waverman, Meschi & Fuss (2005) used World Bank data for all countries, 1980-2003 to estimate impact of mobile penetration on GDP growth – For poor countries: incremental penetration of 10 (per 100 pop) increases GDP growth by ½% • For developed countries, a 10 per 100 increase leads to a GDP growth rate increase of ¼%

– Results are statistically and economically significant • Not published in peer-reviewed journal

• Robert Jensen “The Digital Provide…” (QJE 2007): careful empirical case study of Kerala fisherman 4/17/2009

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Bottom Line • Mobile penetration and use far deeper than wireline, far deeper than PC – Data applications growing fast, everywhere – Internet access, even wireless broadband – Spur to economic growth

• Mobile phones are (and will be) the access device of choice to voice/data/Internet for most of the world’s population. Spectrum availability a key! • Mobile phones are the most transformational, most ubiquitous technology (along with the Internet) in the last fifty years 4/17/2009

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