Last week, our Co-Chairman Bruce Mehlman appeared on a panel as part of the State of the Net in Washington, D.C. The discussion, “The Internet Leadership Challenge: Restoring America to Economic Greatness Through Sound Internet Policy,” was moderated by Joe Waz, Senior Strategic Adviser to the Comcast Corporation. Also on the panel were Blair Levin, Communications & Society Fellow, FCC Commissioner Robert McDowell, Grover Norquist, President of Americans for Tax Reform.
Here’s video of the discussion, which touches on President Obama’s legacy, taxation of the Internet, and the transition from legacy networks to all-IP.
Smart mobile devices are the most personal of computers. The colossal numbers of these devices, and their connectivity to each other and to all the Internet’s vast resources, creates a market so large and so diverse that the economic forces of innovation and specialization are supercharged. This platform of distributed computation and bandwidth offers unlimited possibilities to create tools and content serving every interest. We call this phenomenon Soft Power.
Beyond the app boom’s substantial boost to the economy (as I note in the study, economist Michael Mandel has pegged the number of jobs it currently supports at 519,000 and counting), there are numerous benefits in the consumer space. Not just in entertainment, but for health care and education— from doctors managing patient dosages via an app on their iPad, to the growing number of teenagers who now use smartphones alongside textbooks to complete homework assignments.
Those are just some of the benefits we’re currently witnessing — who knows what innovation in the app space will bring us next? But one thing is certain: In order to keep the good times rolling, two things are absolutely critical. Investment in the mobile ecosystem must continue, and spectrum — the airwaves that make mobile broadband, and thus the mobile app economy, possible — needs be made available.
The latter is currently being tackled by the Federal Communications Commission, albeit slowly, via its upcoming spectrum incentive auctions. The former will require a continued partnership between the public and private sectors to encourage the investment necessary to keep up with this new, and accelerating, economy. As I write in the study:
In the same way that Microsoft expanded its software to exploit the ever increasing number of transistors provided by Intel under Moore’s Law, apps will grow to consume the available computer and communications power of the mobile ecosystem. We will push our devices and networks to the limits — and then beyond. The cycle is nowhere near an end.
Bret Swanson is President of Entropy Economics LLC and a Visiting Fellow of Digital Society. He’s also an IIA Broadband Ambassador.
On Tuesday, December 11, IIA will be hosting a webinar with Entropy Economics President Bret Swanson about his new report “Soft Power: Zero to 60 Billion in Four Years.”
The webinar will cover the new era of software, where apps are the new American software industry. The App Economy boom has hugely benefited consumers, as well as fields like health care and education. “Soft Power” has generated more than half a million jobs in the U.S., but the App Economy’s dependence on the cloud will require ever-increasing network coverage and speed, i.e. more spectrum and investment.
When: Tuesday, December 11th at 11:30am ET/8:30am PT
Courtesy of the Wall Street Journal comes some good news for the economy:
It is estimated that this year’s Cyber Monday will be the biggest online shopping day of the year for the third year in a row. According to research firm comScore, Americans are expected to spend $1.5 billion, up 20% from last year on Cyber Monday, as retailers have ramped up their deals to get shoppers to click on their websites.
The WSJ report also looks at what’s helping drive the increase in Internet sales. Not surprisingly, it’s great access to broadband:
With the growth in high speed Internet access and the wide use of smartphones and tablets, people are relying less on their work computers to shop than they did when Shop.org, the digital division of trade group The National Retail Federation, introduced the term “Cyber Monday.”
“People years ago didn’t have…connectivity to shop online at their homes. So when they went back to work after Thanksgiving they’d shop on the Monday after,” said Vicki Cantrell, executive director of Shop.org. “Now they don’t need the work computer to be able to do that.”
Somewhat ironically, this increase of home broadband access will probably lead to Cyber Monday becoming less of an event.
It is an evolution that goes by many names. Smart networks. Internet Protocol Networks. All-IP.
At its core, is a dramatic shift for America’s communications infrastructure. A major leap forward from the copper networks of the past to the digital communication of today and tomorrow.
This transition from copper to IP has been happening for a while, led by a society that is increasingly “cutting the cord” — dropping traditional landlines in favor of wireless, be it phone service or broadband.
Now things are speeding up. Recently, AT&T announced it will be investing more than $60 billion over three years to accelerate its transition to all-IP networks. This substantial investment is not without its hurdles. While more and more Americans are abandoning a reliance on the copper network, there are still millions of people — many of them in rural areas — who still depend on it for their communication needs.
It is important that the industry work hand-in-hand with the government to ensure no one is left behind as the transition happens. This is a message regulators need to listen to — not only because they share in the responsibility to keep Americans connected, but because of what the shift to all-IP will mean for the economy.
According to broadband association US Telecom, America’s telecommunications companies have invested close to $1.2 trillion since 1996. As recent announcements show, the transition to all-IP promises to unleash even more investment from the highly competitive telecommunications industry — investment that will translate into a substantial increase in jobs and overall economic growth.
Obviously, the government should continue to encourage this high level of investment from private industry. One way they can do so is through modernizing regulations.
As copper networks are increasingly losing relevance, so are the rules governing their operations. Today, companies must continue to invest heavily in their legacy networks even as customers are embracing newer technologies. Not only is this increasingly a waste of investment dollars, it also maintains an uneven playing field, one where certain companies are forced to divert investment dollars necessary to keep them competitive. It is not just the industry that is being held back. The same outdated regulations are also slowing the government’s own goal of connecting everyone in America to high-speed Internet.
The way we communicate changes quickly. Just five years ago, there was no iPhone. Mobile broadband was in its infancy. Tablet computing was almost non-existent. In order to keep up with innovation, the transition to all-IP networks needs to happen now. There is a path to make this transition go as smoothly as possible, one that ensures everyone remains both connected and able to participate in the digital revolution. However, it will take substantial cooperation from private industry and the government to make it happen.
The age of the Internet everywhere is at hand. We just need to ensure regulations from 1930s do not hold it back.
Every year, online holiday shopping continues to make gains. And as Leena Rao of TechCrunch reports, this year analysts are expecting a good season:
After comScore predicted a very healthy holiday shopping season for online retailers yesterday, Forrester is joining in, reporting that this holiday season is expected to generate $68.4 billion in US online sales. That’s a 15% increase over 2011′s total and 3% higher than the expected overall annual online retail growth rate.
Forrester’s report also predicts holiday shoppers will spend over $400 online this year on average, an increase of 12% over last year.
Juliana Gruenwald of the National Journal highlights a new report on tech jobs:
During the first half of the year, the tech industry added nearly 100,000 jobs, an increase of 1.7 percent, bringing the total number of Americans employed in the tech sector to 6 million, according to a new report released on Thursday by the TechAmerica Foundation.
In its jobs report, the group found that the tech industry added jobs in 16 of 18 months from January 2011 until June 2012. The study also found job growth in three of the four sectors it studied, which included tech manufacturing, communications services, software services, and engineering and tech services.
According to TechAmerica Foundation’s report, the tech industry was one of the last to be hit by the 2008 recession, and one of the first to pull out of it.
The fine folks at Mashable have posted an interactive graphic breaking down how major websites and tech companies make their money. Among some of the interesting findings, popular blog provider Tumblr has yet to turn a profit, while Twitter has turned the corner of making money via advertising.
The Washington Post‘s Cecilia Kang has the goods on a new report from the Interactive Advertising Bureau that measures the effect the ad-supported Internet has on the economy:
The IAB-commissioned report from Harvard Business School, which updated a similar 2009 report, found Internet-based companies in every congressional district in the United States. About 2 million people are directly employed by Internet ad-supported firms, the report said.
An additional 3.1 million jobs, including those in Internet advertising and digital advertising analysis, would not exist without the sector.
All told, the economy benefited by $530 billion last year alone, according to the report.
The U.S. government is the single largest user of spectrum, and without its willingness to relinquish control over spectrum bands that are not being put to their highest and best use, our country will suffer from significant losses in economic gains and jobs.
Today the House Energy and Commerce Committee held the hearing “Creating Opportunities Through Improved Government Spectrum Efficiency.” Beyond the hearing’s focus on improving government spectrum efficiency, clearing spectrum for market use is the best strategy for creating new opportunities for entrepreneurship and innovation. Commercial spectrum users need certainty in order to invest and reliably serve their customers.
Innovation to improve the efficiency of the government’s use of spectrum and moving inefficient users off of spectrum bands, as pointed out by Representative Greg Walden, will mean that more American consumers can take advantage of mobile broadband to enhance their quality of life and more businesses can create new technologies that depend on next-generation wireless networks.
At The Hill, Jennifer Martinez reports on a hearing today in the House focused on keeping the growing mobile app market booming:
At the Wednesday hearing, subcommittee chairwoman Rep. Mary Bono Mack (R-Calif.) noted that the booming mobile app marketplace has helped spur the launch of several new small businesses. She said that roughly one-third of apps are developed by entrepreneurs or businesses with fewer than five employees.
“Through American innovation and ingenuity, we’re rapidly becoming a world where there’s literally an app for everything,” she said.
During the hearing, industry reps highlighted some challenges the industry already faces. Among them: trouble finding employees due to a lack of a relatively small pool of trained workers, and an issue we’ve often talked about:
Another challenge facing app companies is the looming spectrum crunch and lack of broadband Internet in rural regions of the U.S., the industry representatives said.
Ramsey argued that there needs to be right infrastructure in place to handle the rising population of mobile apps. That includes ensuring there is enough spectrum, or airwaves, for mobile apps to run on and reach consumers.
Last May, Roger Entner of Recon Analytics released a report on the effect the wireless industry has on America’s economy. Titled “The Wireless Industry: The Essential Engine of US Economic Growth” (PDF), the report found:
• The US wireless industry is responsible for 3.8 million jobs, directly and indirectly, an increase of more than 200,00 over the past six years; this accounts for 2.6% of all US employment.
• The wireless industry is now larger than the publishing, agriculture, hotels and lodging, air transportation, motion picture and recording, and motor vehicle manufacturing industry segments and rivals the computer systems design services and oil and gas extraction industries.
• The wireless industry and its direct and indirect employees paid $88.6 billion in taxes, including federal, state and local fees and taxes.
To help illustrate his report’s findings, Entner has released a series of infographics highlighting essential facts. Below is one on the economic impact of spectrum. The rest are available at the Recon Analytics website.
Via Kent Hoover of The Business Journals, a bill that would allows states to start charging sales taxes on online purchases is gaining momentum:
Bricks-and-mortar retailers have long complained that the tax-free status of e-commerce gives Internet retailers an unfair price advantage. As more retail sales move toward the Internet, state and local governments are increasingly feeling the loss of sales tax revenue. Even many Republican governors who favor keeping taxes low now think the time has come to force Internet retailers to collect sales taxes.
One of those governors is Bill Haslam of Tennessee, who testified a today’s House Judiciary Committee hearing.
“Let me clear—I am a Republican governor that does not believe in increasing taxes,” Haslam said.
Case in point: the telecommunications industry, which just half a decade ago was mainly focused on providing customers with voice calls and texting capabilities. Then Steve Jobs took the stage one afternoon and held up a product he called the iPhone, and since that day the telecom industry — and the computer industry as a whole, really — has been witness to disruption after disruption. Voice minutes are being replaced by data plans. Texting is receiving major competition from Twitter.
While the past five years have been amazing to watch, they’ve also created challenges. And right now, there’s perhaps no bigger challenge — no bigger threat to the continued health and success of the mobile broadband revolution — than a lack of spectrum.
If you’ve followed mobile technology at all over the past year or so, chances are you’ve heard of America’s looming “spectrum crunch.” The very real problem of a shortage of airwaves for the wireless industry — a shortage that will make it extremely difficult, if not outright impossible, for wireless providers to keep up with demand. Congress and the FCC have been working to address this shortage via so-called “incentive auctions,” a process where spectrum holders such as broadcasters are encouraged — and well-compensated — for giving up some of their spectrum holdings for wireless use.
While it’s doubtful the spectrum obtained through these auctions alone will be enough for wireless providers to keep up with skyrocketing demand, they’re still vital for the health of the industry and our economy as a whole. But as with most things in government, the process has been painfully slow, which is why two statements from recently appointed FCC Commissioners this week have been encouraging.
The first came from Commissioner Ajit Pai while he was delivering a speech at Carnegie Mellon University in Pittsburgh. While laying out his vision for the FCC going forward,Pai said:
[T]he FCC must act with the same alacrity as the industry we oversee. That’s not to say we should rush to regulate, but delays at the Commission have substantial real-world consequences: new technologies remain on the shelves; capital lies fallow; and entrepreneurs stop hiring or, even worse, reduce their workforce as they wait for regulatory uncertainty to work itself out.
Pai then went on to talk about the incentive auctions, stating:
[T]he Commission should kick-off the rule-making process for implementing incentive auctions this fall and set a deadline to conduct those auctions no later than June 30, 2014.
Whether such a deadline for auctions is feasible remains to be seen, but it’s a positive sign that a Commissioner of the FCC — a government body even Pai admits has “long had a reputation in Washington as an agency that moves too slowly” — is speaking so strongly about speeding up the process.
Also encouraging were statements from Pai’s fellow recent appointee to the Commission, Jessica Rosenworcel, who just a few days later hit on the need to speed things up — especially for freeing up more spectrum — in a statement of her own. As she said during a FCC meeting yesterday:
We all know that the President has called for 500 megahertz of spectrum to be cleared for commercial use within ten years. We are making progress at the Commission, including in our review of how to provide for more flexible use of the 2 GHz band currently assigned to Mobile Satellite Service. Plus, we have a series of auctions, including incentive auctions, on the near-term horizon. To bring certainty to the marketplace, I believe we should put these auctions on a clear timeline.
So there you have it. Two FCC Commissioners, one a Republican and one a Democrat, agreeing that in order to address America’s spectrum needs the Commission start turning words intoaction. It’s another positive example of the Commission under Chairman Julius Genachowski working to keep pace with the speed of technology, and while the FCC may not be there yet, here’s hoping it happens soon.
Because who knows what things will be like five years from now?
“Mobile Network Design and Deployment: How Incumbent Operators Plan for Technology Upgrades and Related Spectrum Needs” is a paper released last week by engineer Peter Rysavy. In it, he examines the lengthy process wireless providers go through to locate new spectrum and put it to use:
Managing wireless networks is a complex process that must balance infrastructure investment with service revenues, capacity with demand, and that must optimally time the deployment of new technologies. Part of this balancing act is acquiring and deploying radio spectrum. Spectrum can neither be immediately acquired, nor can it be immediately deployed. Instead, operators have to phase it into their networks in conjunction with the right technology at the right time over periods that span many years. The fact that operators may have idle spectrum at specific points in time does not mean that they don’t need it, and it does not mean that they don’t intend to use it.
This will be an important event on an important issue. The mobile broadband revolution — and I think it’s safe to call it a revolution at this point — has helped America make a major dent in its digital divide. Just take a look at some numbers from Pew:
Nearly two-thirds of African-Americans (64%) and Latinos (63%) are wireless internet users, and minority Americans are significantly more likely to own a cell phone than are their white counterparts (87% of black and Hispanics own a cell phone, compared with 80% of whites).
We can all agree it’s critical for America to keep this positive trend going — not just for the digital divide, but for our country’s economic rebound. But the threat of a spectrum shortage — one that could grind innovation to a crawl and hurt consumers with higher prices — has the potential to be a major roadblock.
This is something Minority Media & Telecom Council (MMTC) President and co-founder David Honig recently touched on during an appearance at the World Conference of Mayors Broadband Symposium in Alabama. Broadband & Social Justice’s Marcella Gadson covered Honig’s speech, and wrote:
“The relative affordability of mobile wireless broadband use versus costs for home broadband use sparked some to describe this phenomenon as the ‘minority wireless miracle,’” [Honig] stated. However, “Since African Americans are disproportionately relying on mobile wireless broadband for Internet access, they will be [disproportionately] affected if the supply of commercial spectrum is not increased.”
The spectrum crunch can be a hard issue to wrap your head around. After all, spectrum isn’t something we can see. But the effects of a spectrum shortage will be very visible, and with demand for mobile broadband threatening to soon outstrip the supply of spectrum for mobile use, conversations like tomorrow’s event in Atlanta are an absolute necessity.
IIA will have more coverage of the “The Wireless Spectrum Crisis: Its Impact on Underserved Communities” panel during and after the event. To follow along, use the hashtag #ncbmspectrum.
In an opinion piece for Politico, CTIA President and CEO Steve Largent makes the case that more spectrum for wireless will mean an explosion of innovation:
The world leadership we claim has been built over time, and today the U.S. is home to more than 69 percent of the global LTE subscribers, even though we have less than 5 percent of the world’s population and less than 6 percent of the world’s wireless subscribers.
Some of the most advanced wireless devices were launched first in the U.S., including Apple’s iPhones and iPads, Samsung’s Galaxys, Motorola’s Droids and HTC’s EVO 4G. In addition, Americans may choose from more than 630 unique devices while, by comparison, those in the United Kingdom have fewer than 150 choices. But all this is at risk if the industry is allowed to become even more spectrum constrained.
In response to Largent’s piece, our own Bruce Mehlman left this comment:
American consumers are benefiting from increasingly robust nationwide wireless data services including mobile apps, real-time social media and streaming video. With new wireless subscribers signing up every day and more and more spectrum hungry services snacking on the available airwaves, of course there is less spectrum to go around. Saying that the spectrum crisis isn’t real is an excuse for inaction.
Over at Politic365, Kristal High digs in to the National Urban League’s report “Connecting the Dots: Linking Broadband Adoption to Job Creation and Competitiveness”:
The report explains that in 2010, 56 percent of African Americans had access to broadband at home, compared to 67 percent of whites, or an 11 percent difference. But in 2009, the difference between those same groups was 19 percentage points.
These findings show that increasing numbers of consumers are discovering the limitless potential and possibilities brought by access to mobile broadband. It’s clear that broadband drives economic growth, job creation, and innovation in every industry—but for individuals and families, the benefits include better access to health care and educational opportunities, as well as the ability to find a job, network online, and obtain job training. And for one group that has traditionally had less access to this life-changing technology, things are changing.
The National Urban League’s report is available here (PDF).
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