the wireless way out
march 26, 2009
By Tom Wheeler
Could we talk and text ourselves out of the current economic mess? In the midst of the first shrinking of global economic growth in almost 70 years, the wireless industry represents what must be the largest non-governmental stimulus program in the world.
Wireless is an economic recovery triple play.
Wireless carriers will spend $200 billion worldwide in capital investment this year, according to the GSM Association. The continued explosion of entrepreneurial start-ups with ideas for new applications for that infrastructure is driving new jobs. The result of such investment and innovation creates the productivity gains essential to dig us out of this economic hole.
Here in the U.S., wireless carriers are investing in infrastructure at a rate that dwarfs government stimulus activities in the space. While the Stimulus Package passed by Congress contained $7 billion for broadband infrastructure, AT&T and Verizon each plan to spend $15-18 billion this year on capital investments. It is conceivable that these two companies alone could invest in one year almost five times what the federal broadband stimulus will spend over the next two years.
At precisely the time when investment has stalled for many industries the wireless industry is spending billions. Credit Suisse describes the economy as a “synchronized global recession”. Only the wireless industry appears to have a synchronized global response to stimulate job creation though massive capital expenditures. It is hard to think of another industry with such a collective and mutually-interdependent capital investment program encompassing both developed and developing economies.
Wireless is also a part of the solution in terms of new job growth in start up ventures. Opportunity abounds in the wireless space as walled gardens open to the creativity of entrepreneurs. Approximately 60 percent of all new American jobs are created by small businesses such as these wireless startups. Last year 18 percent of all venture capital investment went to such wireless startups, about $3.6 billion, according to Rutberg & Co. These funds build or expand businesses that didn’t exist previously and create jobs where none existed before.
This is an incredible one-two punch at economic depression: large companies invest billions expanding an infrastructure that small companies take advantage of with new and innovative products and services. The result of this symbiosis is just what the economy needs: jobs, jobs, jobs!
But just like the man says on television, “Wait, there’s even more!”
Combining the benefits of these two forces creates another essential economic recovery tool: productivity. It is a simple equation: productivity gains must exceed economic contraction in order to grow ourselves out of this hole.
A recent Ovum study commissioned by CTIA documented the productivity value of wireless services at $185 billion in 2005 (greater in value than the entire U.S. pharmaceutical industry). Add to this broadband’s impact on productivity and the benefits soar. By 2016 wireless productivity gains to the U.S. economy are estimated to be $427 billion annually.
This wireless triple play is a powerful story of private sector stimulus, new job creation, and overall productivity gains. Of course, it is not the sole vehicle out of this crisis; but it is hard to find an industry that is doing more. Telling that story and inviting governments around the world to understand how they can incentivize economic expansion without public subsidies is a wireless message uniquely suited to these times.
Tom Wheeler is Managing Director of Core Capital Partners, a venture capital firm specializing in early stage companies, including next generation wireless services. For almost a dozen years prior to joining Core Capital he was the president of the Cellular Telecommunications & Internet Association.