Deloitte Report Says Fourth Generation (4G) Mobile Can Boost US Economy and Competitiveness

It is always useful to get an independent perspective on just what technology deployment can mean to a given country’s economy. In this regard, the consulting arm of Deloitte LLP, gave more than a ray of sunshine for the U.S. in it just released report, “The Impact of 4G Technology on Commercial Interactions, Economic Growth and U.S. Competitiveness.” It investigates the economic dynamics surrounding 4G technology and explains how the U.S. can main the global mobile broadband innovation leadership it has won in the 3G era.

Report highlights include:

• U.S. wireless companies could invest US$25 to US$53 billion in fourth generation (4G) cellular networks between 2012 and 2016
• This would trigger US$73 to US$151 billion in gross domestic product (GDP) growth
• Creating 371,000 to 771,000 jobs
• Additional growth could occur as others leveraged the advanced infrastructure

Caveats to the report were as follows:

• The $25 billion figure assumes a baseline moderate 3G to 4G pace through the middle of the decade. The report feels under these circumstances U.S. firms are vulnerable to incursions by foreign competitors.
• The $53 billion figure assumes a more rapid transition that thwarts foreign companies getting U.S. market traction and where demand stimulated by new offerings justifies more network investment that positions the U.S. to retain its mobile broadband leadership.

In the press release describing the report’s results, Phil Asmundson, vice chairman and U.S. media and telecommunications sector leader, Deloitte LLP stated that, "Investment in such a powerful form of communication contributes to the economic recovery and provides a job-creating engine for the future... The key to harnessing the potential benefits of 4G technology lies in America's market-driven wireless sector, which encourages the emergence of innovative applications that spur productivity and could produce the same surge of innovation and demand we experienced during the 3G era."

Aside from the organic stimulus accelerated 4G deployment could provide the U.S. economy, Deloitte sees the virtuous circle of growth — investment spurring innovation that accelerates further investment— created with U.S. leadership in 3G deployment and market adoption being replicated with even greater multiplier effects being experienced with 4G. In fact, the report shows how the U.S. has out-distanced other countries with 3G, validating what many would think was not the case given the high penetration of GSM networks in Europe and the explosive growth of 3G networks in Asia-Pacific.

Where growth can come from

 Areas cited for exponential growth include:

• Cloud Computing:  Asmundson said, “The benefits of 4G and cloud go beyond the telecom sector. Together, 4G and cloud technologies support the kind of entrepreneurial ecosystem that has made the United States a mobile broadband leader."
• 4G Enabling Marginalized Groups: The report indicates that 4G has special positive implications for certain disadvantaged markets including minority groups, rural communities and localities with limited access to full broadband connectivity, and some small businesses by moving them further into the nation's economic mainstream, thereby serving the public interest while boosting U.S. competitiveness.

Ensuring success

To ensure the US$53 billion scenario rather than the more risky US$23 billion, the Deloitte's analysis points to two factors that fostered America's success in 3G: providing enough new spectrum to meet growing demands; and letting private enterprise make better use of available spectrum.  The role of government in their view is to create the conditions “conducive to market-based innovation,” and let the market work its magic.

It is difficult to fault the logic here. The reality is, the wireless carriers in the U.S. should and are very likely to track along the more aggressive scenario painted by Deloitte, and the reasons are purely economic:

• Increasingly, the bulk of the dominant U.S. carrier profits and growth are coming from their wireless (mostly mobile but also Wi-Fi) and not wired fixed operations.
• The proliferation of smartphones and tablets has set off a race to provide the speed the users of these devices crave and are willing to pay for. This is true not just in the mass market, but will be increasingly true in the enterprise markets.
• Studies have shown that in a growing number of U.S. markets, due to the explosion of not just smartphones but in anticipation of increasing machine-to-machine traffic, current wireless networks are reaching their saturation points dictating an upgrade to faster, flatter, more flexible and more economical networks.
• U.S. providers have every incentive to prevent foreign competitors setting up shop in the U.S. It would seem like a somewhat implausible notion that this could occur but, for instance, China Telecom and China Mobile are looking at broadening their foreign investments, and they always favor made in China infrastructure.

As the Deloitte study says, the big wild card in the U.S. is going to surround the FCC’s ability to allocate enough spectrum to meet the growing demand for wireless broadband services, and given our market-driven approach who ends up owning and operating that spectrum.

The numbers do speak volumes.

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