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 themwe all buy and use them
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Standard Reaction to New Mass Technology

Similar concerns when television introduced in late 1940s
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.

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The US Picture-Subscriber Growth

262,720,165 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 28,154,414 19,283,306 13,067,318 8,892,535 6,380,053 4,368,686 2,691,793 1,608,697 883,778 500,000 203,600 300,000,000 250,000,000 200,000,000 150,000,000 100,000,000 50,000,000 0 Jun-95 Jun-94 Jun-93 Jun-92 Jun-91 Jun-90 Jun-89 Jun-88 Jun-87 Jun-86 Jun-85 243,428,202 219,652,457 194,479,364 169,467,393 148,065,824 134,561,370 118,397,734 97,035,925 76,284,753 60,831,431 48,705,553 38,195,466

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2,200 2,000 1,800 1,600 1,400

Billions

The US Picture Voice Minutes

1,200 1,000 800 600 400 200 0

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

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The US Picture Price v Volume

800 $0.50 $0.45 $0.40
Average Revenue Per Voice Minute

700 Monthly Minutes of Use

600
Minutes of Use Per Month

$0.35 500 $0.30 $0.25 $0.20 $0.15 200 $0.10 100 Revenue Per Minute $0.05 $0.00 1994 1996 1998 2000 2002 2004 2006

400

300

Source: FCC 12th CMRS Report

Minutes of Use Per Month

Average Revenue Per Voice Minute

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The US Picture Wireless v Wireline

450,000,000 400,000,000

350,000,000 238,229,953 217,418,404 192,053,067 167,313,001

147,623,734

300,000,000 114,028,928

130,751,459

90,643,058

250,000,000

200,000,000 11,557,381 150,000,000

17,274,727

21,644,928

26,985,345

32,033,915

33,975,336

29,896,109

28,711,461

187,554,423

188,465,144

185,502,928

179,822,123

179,981,490

173,031,945

165,946,706

157,039,893

100,000,000

50,000,000

0 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 CLECs Jun-05 W ireless Jun-06 Jun-07

USAC ILEC Line Counts

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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 betterTV, PCs, broadband More mobiles than TVs (235M), Internet users (230M), PCs (220M), and broadband (80.2M)
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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

50

3G Subcribers (in Millions)

40

38

30

22 20

10 10 3 0 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07

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How about the rest of the world?

Mobiles 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 worlds population

wireline never exceeded 20% penetration PC penetration = 8.5%, Internet users = 20%, broadband 5.4%
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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
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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: Im saving time and saving money
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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
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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 %
For developed countries, a 10 per 100 increase leads to a GDP growth rate increase of %

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
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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 worlds population. Spectrum availability a key! Mobile phones are the most transformational, most ubiquitous technology (along with the Internet) in the last fifty years
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