Australia's mobile broadband boon

Mobile broadband services are boosting Australia's productivity, and we have an opportunity to reconsider how best to manage limited spectrum resources to drive further gains.

Yesterday the Australian Communications and Media Authority released a report detailing how mobile services have added to Australia's GDP through a massive boost to productivity. However ACMA, which plans and manages the radiofrequency spectrum in Australia, also warned of continuing challenges around spectrum allocation. Here the federal communications minister responds.

A study commissioned by the ACMA into the economic impact of mobile broadband has found that our phones added more than $33 billion to Australia’s economy in the six years to 2013.

Figure 1: Economic impacts of mobile broadband

Graph for Australia's mobile broadband boon

While debate about fixed line networks and the National Broadband Network dominates political and public policy discussions about communications in this country, the amazing contribution of mobile wireless to productivity and our standard of living has gone largely under the radar. 

That’s because the market has operated efficiently and arguments for government intervention have mostly been at the margins. The current government is committed to investing $100 million to expand mobile coverage in the bush, for instance.

Mobile broadband is both a major industry in its own right, and an input that virtually every other sector of the economy needs to do business.

Looking at the sector in its own right, it’s clear the market is operating fairly efficiently. I spoke to Phil Manners, an author of the report and director of the Centre for International Economics. Phil’s work shows that we are using more bits and bytes every year, but pay virtually nothing extra for the additional value.

Analysys Mason forecasts consumption of 4G data will grow by 76 per cent per year between now and 2017. But the inflation-adjusted cost of mobile access keeps falling (a point commonly overlooked in the NBN debate) -- the average user in 2013 spent 20 per cent less per connected device than they did in 2007.

Figure 2: Prices of mobile communications 2006 to 2013

Graph for Australia's mobile broadband boon

Productivity is driven by two important factors -- the rate of technological progress (which determines the location of a limit often described as the productivity ‘frontier’) and the speed with which a particular economy -- whether national or local -- takes up, integrates and adapts new technologies (which determines how near or far it is from the frontier).

Governments tend not to be very good at innovating -- that’s best left to businesses, researchers and entrepreneurs. But good public policy can bring us closer to the frontier, by repealing unnecessary regulation, removing distorting or poorly designed tariffs and taxes, sharpening incentives and opening markets up to competition.  (Governments also have a role in funding areas such as education and pure research which have benefits to the broader economy.)

Phil’s work shows huge evidence of continued technological innovation (the study covers the period 2007 to 2013, which includes only part of the accelerating adoption of smart phones; smart phone penetration reached 50 per cent in 2011, climbed to 76 per cent by 2013 and is forecast to be almost 90 per cent by 2017).

But since the 1990s, we seem to be getting less bang for our innovation buck, arguably because government policy hasn’t been as focused on encouraging companies and consumers to be as close to the frontier as possible.

From the perspective of the mobile broadband industry, there are two important things governments can do to promote productivity and efficiency within the sector (as opposed to mobile take-up across the broader economy).

The first is to ensure that when they allocate (or sell) radiofrequency spectrum, this process isn’t simply a means to a particular policy objective. Rather, if there are competing claims on a public asset (such as spectrum licenses), then rigorous analysis of the costs and benefits of the different outcomes should be conducted, to ensure benefit to the whole economy is maximised.

A good example of such a situation is the debate over whether or not to allocate spectrum to the police and emergency services, so they can roll out and operate their own communications networks to use as they do their jobs, including dealing with major civil emergencies or disasters.

The government agrees that mobile broadband is an important capability for police and emergency services, but it also raises fundamental questions:

• Can existing private mobile operators build resilient, high-capacity networks for public agencies using packet prioritisation?
• Is building an entirely new mobile network an efficient use of the agencies’ constrained budgets?
• Could an alternative allocation of spectrum achieve the public policy objective more efficiently?

The second interesting idea for governments to consider is whether they alone should handle allocation of spectrum, or whether assets (licenses) could be traded in a market setting.

There was much debate and criticism of the previous government’s handling of the ‘digital dividend’ spectrum auction, after a high floor price was set and one third of the so-called ‘waterfront’ capacity -- 30MHz in the prized 700 MHz band -- went unsold.

This had negative implications for the government, in that revenue was foregone, but also ramifications for the wider economy (since a valuable asset was left unused).

I am eager to explore these ideas and others relating to the management of our spectrum to ensure that we are operating an efficient spectrum management regime and deriving maximum economic and social benefit from our limited spectrum resources.

Most mobile operators tend to argue for less government intrusion. Telstra’s Covec report, for instance, found consumers benefit from the high intensity of competition in the Australian mobile market, the long-standing light-touch approach to regulation, and strong investment in new mobile technologies.

The report points out that mobile communication has delivered significant benefit to the economy -- and this will only grow with the rapid rollout and adoption of 4G, the fastest and latest variant of wireless connectivity.

Malcolm Turnbull is the federal communications minister. This article first appeared on his official blog.

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