A February 2012 paper by PPI Chief Economic Strategist Michael Mandel estimated that the App Economy has generated almost 500,000 new jobs since 2007. Mandel wrote:
“The incredibly rapid rise of smartphones, tablets, and social media, and the applications—‘apps’—that run on them, is perhaps the biggest economic and technological phenomenon today…On an economic level, each app represents jobs—for programmers, for user interface designers, for marketers, for managers, for support staff….
…App Economy employment also includes app-related jobs at large companies such as Electronic Arts, Amazon, and AT&T, as well as app ‘infrastructure’ jobs at core ﬁrms such as Google, Apple, and Facebook. In addition, the App Economy total includes employment spillovers to the rest of the economy.”
The growth of App Economy employment is a bright spot in an otherwise sluggish labor market, showing how innovation is still the best job creator.
So how then can Washington best encourage the continued growth of the App Economy? The absolutely essential ingredient for the App Economy is spectrum. By spectrum, we are referring to the radio frequencies which carry the streams of data to our smartphones and tablets. And as apps get more and more sophisticated and indispensable, our mobile data needs grow rapidly, and we face the danger of a spectrum crunch.
That means there’s a great need for the Government, which controls spectrum licenses, to free up additional spectrum if App Economy employment – and future mobile service innovation – is to grow. Last week, Congress authorized the Federal Communications Commission (FCC) to organize a “voluntary incentive auction” for unused, or underused, spectrum. The FCC is working with TV broadcasters to sell their unused and underused spectrum in an auction format to commercial wireless broadband providers that need more spectrum for wireless network and capacity extension. The winning bidders are likely to be mobile service providers and the current broadcast license owners will receive a share of the selling price. This auction is part of a plan by the Obama Administration to sell 500 megahertz of spectrum over the next 10 years.
However, as part of last week’s legislation, Congress also gave the FCC the authority to establish general applicability rules for the auction regarding the amount of spectrum any one company can hold. In other words, the FCC has the ability to restrict which companies can participate in the auction, if the participant owns more spectrum than the FCC deems eligible. Unfortunately, the FCC appears to be working under the assumption that only the larger mobile service providers will obtain spectrum at auction, out-bidding smaller rivals.
But at a time when the App Economy is creating jobs at a rapid pace, the FCC should not try to dictate who should or should not be allowed to buy spectrum. The key to making the voluntary auction a success is ensuring that spectrum is awarded to the companies who can get it to consumers as quickly and efficiently as possible, who have the resources now to invest in new innovations, creating jobs and boosting the economy in the process. And the economic potential of spectrum innovation is great. A recent study by Robert Shapiro and Kevin Hassett calculates that over 1.5 million jobs were created over 2007-2011 from wireless providers’ switch from 2G to 3G.
Which companies are best suited to get spectrum innovations to market quickly and effectively? A December 2011 policy brief from PPI, “Scale and Innovation in Today’s Economy,” shows that larger companies with a national reach may be the best placed to quickly move innovations through development into the hands of consumers. Larger companies have the resources readily available and the platforms needed to implement large-scale innovations to a national wireless network. What’s more, smaller carriers increasingly depend on the ability of larger companies to effectively move wireless network innovations to scale to provide their customers with better service.
It may be at least a year or more before the FCC implements the new legislation, and many more years before an auction takes place. Until then, mobile service providers will be forced to work within their existing spectrum, and hopefully will continue to find new ways to make spectrum more efficient. Indeed, mobile providers have already invested billions to increase the data-carrying capacity of existing spectrum. For example, in 2011, AT&T introduced 4G, the fourth generation of high-speed wireless communication, to its mobile services which is 50 percent more efficient than its 3G predecessor.
While such efficiency-boosting advancements are very important to the future of spectrum, and to the future of the App Economy, the only long-term solution is to get as much spectrum to market as possible, as quickly as possible. And given the clear importance of the App Economy for driving growth, making sure the FCC conducts spectrum auctions the right way – by not restricting eligible participants – is critical for creating tomorrow’s jobs and ensuring a strong economic recovery.
Photo Credit: Brian Wilkins