Study: Wireless Industry Contributes $92 Billion to U.S. Economy

The wireless industry supported 3.6 million jobs in 2004, and the industry and its customers generated $63 billion in govt. revenue, including federal, state and local fees and taxes. It also contributed $2.6 billion to the federal and state universal service fund, or roughly 1/3 of total contributions, the study said. The study estimated U.S. business users enjoyed at least $15 billion in annual productivity gains. The use and availability of wireless services and products created a $157 billion consumer surplus, it said.

“The good news is that the FCC knows already that wireless is making enormous contribution to the economic prosperity of the United States,” said Greg Sidak, visiting law prof. at Georgetown U. and former FCC deputy gen. counsel. Sidak warned against regulatory intervention that “could dampen the subscribership and the usage of wireless communications.” At the federal level, he said, “the most important policy is sensible spectrum allocation and that includes permitting existing spectrum allocation to be modified” so spectrum is put to its highest use.

State and municipal regulations could be most dangerous, Sidak said: “If you look at what is going on at some of the state PUCs and state legislatures, there is an interest in regulating wireless communications because of its success.” For example, he said Cal. has seen that “as a justification for trying to add layers of so-called consumer protection regulations. But in the industry that is fundamentally different from wireline telephony, that is a misguided policy.”

Taxation is another “form of policy distortion” that threatens the industry, Sidak said: “The average tax rate on wireless services is higher than an average rate on business services and products generally. That’s inefficient from an economist’s prospective, because relative to wireline telephony, wireless communications is much more price sensitive,” and imposing higher taxes on it could “dampen demand.” Sidak also said growing wireless substitution of wireline services “means that the need for the very elaborate regime we have over wireline networks should naturally decline overtime because competition makes it unnecessary.”

Former FCC Comr. Harold Furtchgott-Roth stressed the importance to continue to measure the wireless industry’s growth. For that, he said, “we need to think very carefully about how we define the wireless industry.” Although wireless services is a “very large part” of the wireless world, “there are a lot of other things going on as well” and “it’s important to try to capture all of it because it’s… blending together,” he said. Other wireless industry segments to look at include manufacturing, distribution networks, the software industry that’s increasingly focused on wireless applications, the retail distribution, the dependent industries and the way wireless services and products affect people’s lives, Furtchgott-Roth said: “In terms of what this industry means for the economy, it’s not just about dollars and cents; it’s also about the way people live their lives.”

Thomas Hazlett, prof. of law at George Mason U., supported the govt. making more spectrum available for the wireless industry. “The economic welfare is maximized with more spectrum in the mobile phone market and more competitive final markets,” he said. Auction revenue has a “much smaller impact,” he said: “Policies that increase auction revenue by sacrificing retail market competition are ‘one penny wise, pound foolish.'” Putting more spectrum out would lead to a “very large increase in consumer welfare” and benefit the industry, he said. For example, he said, recent wireless industry consolidation was driven by demand for access to radio spectrum.

The U.S. wireless industry will continue to generate substantial economic benefits over the next 10 years, the study predicted. Over that time, the supply of wireless services and handsets will generate over $450 billion in GDP and create 2-3 million new jobs, it said. On the demand side, the study estimated the industry will create $750 billion in consumer surplus from use of voice services, save more than $600 billion to U.S. businesses. “The wireless industry is almost as large as the agriculture and automobile industries and we expect it to be even larger in the next 5 years,” Entner told us: “The wireless industry is growing at 15% a year, while others are growing in line with the economy overall and that is about 5%.”