Supply and Demand for Data, Economics Analysis

Supply and Demand for Data

Executive Summary

Wireless data is a relatively new segment of the wireless telephony industry, established in 2005 with the introduction of third generation (3G) network technology. Originally it only featured premium niche products targeted to the “road warrior” available only with Tier 1 providers (Verizon, Sprint and AT&T).

The introduction of new wireless data focused technology like broadband cards, iphones, ipads and android phones has caused mobile data use to grow exponentially. In fact, the introduction of the iphone in 2007 was a watershed moment creating a demand shock the wireless industry ecosystem.

From 2008 to 2010 mobile data traffic volume in the United States has grown 750 percent and the trend is expected to continue with some forecasts suggesting annual U.S. mobile data traffic volume increases of roughly 9,000 percent within just five years.

Combining the power of the internet with an already robust cellular industry has created productivity acceleration in the economy. The time savings and efficiency of ubiquitous always on internet access will add between 4.5 to 6.3 million jobs and .9% to 1.3% to GDP growth. (Entner, 2008).

However, wireless carriers are scrambling to manage the new demand that has put considerable strain on networks originally built to manage voice traffic. Additionally, industry must also be prepared to react to government policies such as “Net Neutrality” and consider implications of the recent Broadband Stimulus Act.

Based on current industry estimates of data growth coupled with the fact that 66% of this future demand is likely to be video, the most taxing type of data, 4G technology will not solve the capacity issues long-term.

History and Overview of Situation

The early 1990s saw the incredible growth of two emerging technologies, wireless cell phones and the internet, that have individually contributed to productivity acceleration in the economy. Initially,...