Will The Mobile Boom Go Bust?

The mobile communications boom has been good for the economy, but will it last?

That was one of the questions explored by prominent economists who spoke at the Institute for Policy Innovation’s Fourth Annual Communications Summit this week in Washington, DC.

Dr. Kevin Hassett, Senior Fellow and Director of Economic Policy Studies at the American Enterprise Institute, says while other industries have languished during most recent economic downturn; the communications industry has flourished.

He says studies show the communications sector has added more than 1.5 million jobs since 2007. Of those, 250,000 were related to the creation of mobile apps, making that a significant and promising area for job growth.

“For the first time, the communications sector is driving growth in the macro economy,” Hassett says. What might threaten that growth however, is the shortage the industry faces with regard to available mobile spectrum.

Getting their hands on enough spectrum to meet ever-growing consumer demand was the focus of discussion by mobile industry heavyweights such as CTIA (International Association for the Wireless Telecommunication Industry) President Steve Largent , Verizon Vice President for Wireless Policy Development, Charla Rath, and MetroPCS General Counsel, Secretary, and Vice Chairman, Mark Stachiw.

All agreed that recently passed congressional legislation that paves the way for “incentive auctions” of spectrum currently held by TV broadcasters, is a step in the right direction. However, they cautioned that it could take 4 to 5 years at the least–and maybe even as much as 10 years–to complete that process. In the meantime, they say, it will become increasingly difficult to meet ever-growing mobile demand.

In addition, the auctions are likely to only open up 60 to 120 MHz of spectrum, when the actual need is much greater. How much greater is unknown, though they note President Obama issued a memo directing that as much as 500 MHz be made available to help ensure American’s competitiveness and global technology leadership.

Whatever the number, Stachiw says, what they need is a “continuous supply” of spectrum so they can plan effectively for network infrastructure and handhelds.

But where will that continuous supply will come from, if the broadcast spectrum auctions don’t fill the gap? One source, Rath says, is the Federal government itself. She suggests that some of the spectrum the government currently holds for uses such as military, safety, and law enforcement, could be made available to the mobile industry.

Because studies show improvements in mobile technology actually result the creation of new jobs; Hassett says downturns in the industry caused by lack of spectrum could mean fewer jobs.

Dr. Michael Mandel, Chief Economic Analyst of the Progressive Policy Institute, says increased regulation in the mobile sector could also have a negative impact on employment. He says it is important for policy makers to know that “getting in and mucking it up with increased regulation could harm job growth”.

Other  speakers echoed Dr. Mandel’s call for the government to have a  “hands-off” approach when it comes to mobile industry regulation.They included CTIA President Steve Largent, who says the industry should police itself.  “This industry has grown since government has shown restraint and allowed us to meet consumer demand”, he says.

 Professor Thomas W. Hazlett of George Mason University agrees, and says the government should revise restrictive and out of date policies related to spectrum allocation. He advocates a more “generic” policy that would allow spectrum deals to get done more quickly and efficiently. Without such changes, Hazlett maintains, mobile providers won’t be able to secure the spectrum quickly enough to meet consumer demand.

When it comes to demand, though, while it appears to be limitless now; Hassett noted that eventually the technology will become so widely adopted there will be little room for additional growth. At that point, fellow panel member Mandel conceded, there actually could be a “bust”, along the lines of the Internet bubble of the ’90s.

But from Stachiw’s perspective; future demand appears to be a “vertical wall”. No matter how much spectrum becomes available, the MetroPCS executive says, “people will always find ways to use it”.

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