For those of you keeping track of the global mobile communications market, particularly if you are a U.S. policymaker and understand the impact world class mobile broadband will have on the future economic vitality of our country, then a new Deloitte analysis is going to be of intense interest. Titled “United States expands global lead in mobile broadband: How policy actions could enhance or imperil America’s mobile broadband competitiveness,” this should be on the “must read” lists of the FCC and the Congress.
As the title suggests, in many ways this is a “good news, bad news” view of the U.S. versus other countries. The good news is that based on Deloitte’s “Mobile Communications National Achievement Index”—developed in 2012 to track the relative strength of countries’ wireless sectors—the U.S. has a global leadership position based on a series of metrics. However, as the authors state upfront:
“We offer contrasting spectrum policy scenarios and assess their effect on the index rankings. We demonstrate how, if U.S. policies are insufficient to address carriers’ growing need for spectrum, U.S. wireless development can be constrained, putting America’s mobile broadband leadership at risk over the coming decade, along with the benefits to the U.S. economy that leadership confers.”
First, the good news
According to Deloitte, the U.S. increased its position in the mobile broadband market by 11 percent in the most recent periods covered in the mobile index, which compares the U.S. against 19 other countries using 15 competitive indicators. As a result, the U.S. increased its lead by about 44 percent. The report notes that this essentially recovered the ground the U.S. had lost over the last several years and returned it to a lead similar to one it had in 2008.
The analysis hearkens back to a saying by U.S. baseball pitcher Satchel Paige, who observed, "Don't look back. Something might be gaining on you." In this case that something is third-ranked Canada, which upped its position by gaining about 6 percent, while China increased about 5 percent.
In noting that the U.S. position has not always been strong, the authors explain how from 2006 to 2009, roughly three-quarters of the U.S. lead vanished despite strong investments, largely because other countries and their governments made proportionately larger significant investments in developing and growing their mobile broadband capabilities and usage. “In other words, during this period, the U.S. lead did not shrink due to a lack of effort or decline in capabilities, but simply because global competitors improved faster,” observe the authors.
The not-so-good news
Let’s start with the assertion in the report that if the U.S. loses its current position as the global leader in mobile broadband, the economic consequences at home could be severe. The contention based on a look at the numbers and scenarios is certainly a cause for concern. Some numbers to ponder include:
The graph below from the report illustrates the point:
Source: Deloitte Report: "United States Expands Global Lead in Mobile Broadband," September 2014 (click to enlarge)
The caution here is that this is one of the two scenarios outlined in the report which follows the firm’s Airwave Overload report from two years ago, and updates the index produced at that time.
Commenting on the report Craig Wigginton, partner, Deloitte & Touche LLP, and U.S., global and Americas telecommunications leader, emphasized the implications of the findings starting as mentioned above with the positive but hedging on the future. “The good news is that the U.S. is the global leader in mobile broadband and also continues to have a dominant position in other critical aspects of the mobile ecosystem," said Wigginton. "It's important, however, that we not become complacent. Other countries are aggressively positioning themselves for a time when the U.S. might become vulnerable due to a mobile broadband supply shortage. While industry actions have yielded significant supply improvements and play a vital role in shoring up U.S. mobile broadband leadership in the near-term, there are limits to how much more industry can accomplish with a finite amount of spectrum."
A call to action
While the report contains factoids about the importance to the U.S. economy of continuation of the leadership in mobile broadband, it is the analysis of the spectrum problems that could be a boat anchor on maintaining this position that make this document so important.
The report for example cites several countries that are aggressively positioning themselves for a time when the U.S. might become vulnerable due to a mobile broadband supply shortage. China not surprisingly stands out based on its intention to invest $320 billion in broadband infrastructure through 2020 and investment in 4G may reach $16 billion in 2014. India is also highlighted based on it plans to auction up to 100 MHz of additional spectrum in the 700 MHz band.
The report holds no bars in its description of the drag U.S. public policy poses. “The pace of government action is an issue, given past experience in bringing additional spectrum into the market. History shows that years or even a decade can pass between the initiation of a spectrum reallocation and the point when the spectrum becomes available for use…The clear and negative implications of a mobile broadband supply shortage highlight the significance of government policy decisions and implementation. Progress on this front is vitally important to fuel continued investment, innovation, and use by carriers, the rest of the mobile broadband ecosystem, and customers.”
The report concludes with a call for a redoubling of U.S. efforts to put spectrum of sufficient quantity and quality into the marketplace in the next few years for wireless carriers to meet demand.
This too is a case of good news and bad news as well. The good news is that the industry and policy-makers understand that more spectrum is needed. They also know that given the importance to the overall U.S. economy of having not just a world class but the world’s most extensive mobile broadband infrastructure, there needs to be greatly expedited processes so the lag from auction to activation is cut significantly. The bad news is if history is an indicator getting anything done quickly on the policy front, even in the face of a need for urgency, the worst case scenario seems almost pre-destined as the path that will be followed.
As the report points out the decline in U.S. leadership in mobile broadband is certainly not inevitable. The U.S. starts from a position of strength in terms of numbers, talent, financial clout, etc. If this report can do nothing more than get all of the stakeholders to focus with a real sense of urgency on the need for if not parity for all of the competing interests at least rough justice, it will have performed yeoman’s service.
FCC Chairman Tom Wheeler, a former wireless industry leader and skilled political consensus builder, is more than aware of the issues highlighted in the report. Those skills are going to be severely tested, especially given what really needs to be agreement by everyone that inaction is not an alternative. The Deloitte report is just the kind of reasoned reality check that hopefully can generate the actions needed, sooner instead of later.
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