Economic Growth

How is the mobile economy changing the global economy?

Steve Mollenkopf
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Economic Progress

More than 150 years ago, the far-sighted French photographer, artist and balloonist Gaspard-Félix Tournachon said the three defining elements of modernity were “photography, electricity and aeronautics.”

If he were alive today, Tournachon would surely name a fourth: connectivity.

We now live in a world shaped and defined by our ability to reach friends, loved ones, business partners and the legions of people in our networks no matter where we are and no matter how far away they may be. And we don’t just reach into our pockets and pull out a device that lets us talk with one another. We video-chat, we share photos, we transmit biomedical data, we access all manner of written and high-definition video media, we work and we play in more ways than probably anyone could now quantify.

Our children will never know a world when this wasn’t possible, yet a decade and a half ago these wireless wonders were the stuff of science fiction.

Now, the mobile technology behind this age of connectivity isn’t just enhancing and defining our daily lives, it is guiding and enriching our communities and our world on a macroeconomic level.

The mobile industry: it just keeps growing

A new study from the Boston Consulting Group sought to analyse the economic impact of mobile communications on consumers, businesses and nations, with deeper examinations of the impact on Brazil, China, Germany, India, South Korea and the United States. The results, drawn from government, engineering and market data, as well as surveys of businesses and consumers, are eye-opening, especially for the users of wireless technology.

The expanding 4G networks that are already widespread in many industrialized nations offer data speeds that are 12,000 times faster than the speeds of 2G, one of the most resonating engineering miracles in history.

At the same time, mobile subscription costs per megabyte of transmitted data fell 99% from 2005 to 2013, and smartphones are now available for as little as $40. The reason mobility is so affordable: scale. In less than 15 years, adoption of 3G and 4G technology has grown to nearly 3 billion connections, and that number is expected to exceed 8 billion by 2020.

Meanwhile, in the six countries surveyed, the annual value of mobile gross domestic product, or mGDP – spending on mobile devices, mobile connectivity and mobile commerce – is more than $1.2 trillion. Yes, trillion. The United States has the largest absolute mGDP, standing at $548 billion, or about 3.2% of GDP, which exceeds the economic contribution of the auto industry. The Boston Consulting Group also calculated the aggregate value of mobile technologies – the value derived by consumers from use of their wireless devices – to be roughly $6.4 trillion.

Mobile technology is especially valuable for consumers in emerging markets. BCG reports that in China and India, the value to consumers exceeded 40% of their annual income.

The business case for mobile

It also levels the playing field for small and medium-sized enterprises, the report found. SMEs that reported using at least three mobile applications in their operations or marketing and sales work saw revenue rise two times faster than other similarly sized firms and created jobs up to six times faster than their peers. In emerging markets, mobile tech is allowing SMEs to leapfrog older generations of technology still widely used in more industrialized countries, and the percentage of these “mobile leaders” in China, India and Brazil is higher than in their more developed counterparts.

The study predicts that if more SMEs expanded at the rate of the “mobile leaders”, an additional 7 million jobs could be created in the six countries studied over the next three years.

But none of this happens in a vacuum.

Keeping the progress going

The study finds a direct correlation between these technological advances and their economic benefits, and the rule-of-law systems that allows this innovation to take place and be brought to market. It notes the core technology innovators for 2G, 3G and 4G wireless – Qualcomm is among them – “take enormous risks by spending heavily on research and development with no guarantee of return on investment. Companies focused on mobile’s core technologies invest a larger share of revenue (21%) in R&D than any other industry except biotechnology – and more than all other R&D-heavy industries.”

And that, the study concludes, offers a roadmap for future development technologically and economically.

The vast majority of surveyed consumers, of course, want faster data speeds, more wireless coverage, more battery life and many other improvements – at a time when data traffic is already expected to increase by 1,000 times before this decade is over.

Such future growth, BCG says, depends on continuing the policies that enabled the growth to date, including “strong patent protection to encourage large and risky investments in mobile technology innovation”, and preservation of the wireless industry standards process that brings together companies from throughout the industry to solve complex technology problems and make those solutions widely shared.

This extraordinary change isn’t ancient history. We have seen the wondrous pace of technological evolution accelerate before our eyes, and we know why it happened and what it has accomplished.

At a time when regulators and legislators are reexamining patent laws and pondering the best ways to nurture innovation, it is worth policy-makers and industry leaders taking a moment  to look at this mobile evolution, this mobile revolution, and think about what we must do to keep these advances going.

Author: Steve Mollenkopf is Chief Executive Officer of Qualcomm Incorporated

Image: The Pierre building is seen through a stairway as customers enter a retail store on Fifth Avenue in Manhattan, New York September 20, 2013. REUTERS/Adrees Latif.

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