Wireless Revs Up the U.S. Economy
                                                                                                By Roger Entner

As the wireless telecommunications industry has matured over the past two decades, the industry’s contribution to the economic health of the United States has also grown and is now one of significant stature. Wireless provides millions of Americans jobs, contributes billions of dollars to the United States economy and is expected to become a larger part of the U.S. economy than the agriculture and automobile sectors within five years. The industry has unquestionably benefited
from a light regulatory environment that has nurtured a climate of intense competition and, as a result, substantial consumer gains in productivity and surplus revenue. The industry is fulfilling its promise as a key sector of the economy with tremendous potential to not only infuse the economy with much-needed vitality, but to further increase its fiscal support of local, state, and federal government through the payment of corporate and personal income taxes.

Of the $104.4 billion Americans spent on wireless in 2004, Ovum’s research indicates that more than 70 percent of the value add generated by the wireless telecom industry was retained in the U.S. resulting in a gross domestic product contribution of $92 billion. To put this in context, if the wireless  telecommunications industry were a country, its economy would be bigger than that of Egypt, as measured by GDP. The growth of revenues generated by the industry’s supply-side value chain combined with the economy-wide productivity gains from wireless services has positively impacted U.S. GDP, employment, and government revenues.

Supply Side Benefits from Wireless Services
U.S. businesses and consumers spent $118 billion on wireless telecom products and services in 2004, with this revenue flowing along an extensive U.S. industry value chain. We can see that during 2004, U.S. end-users spent $104.4 billion to purchase wireless telecom services. The vast majority of that, $101.2 billion, flowed to facilities-based carriers, while $3.2 billion was paid to resellers such as Virgin Mobile USA and Tracfone Wireless. Resellers and Mobile Virtual Network Operators (MVNOs) received $3.2 billion in service revenues, with resellers remitting $900 million to their wireless carrier wholesalers for airtime, leaving resellers and their other upstream suppliers with valued added revenues of $2.2 billion.

Ovum and Indepen analyzed the impact that the United States wireless telecom industry had on the U.S. economy in 2004 and the projected impact it will have over the next 10 years. The following is a summary of that report, which is based largely on publicly available data concerning wireless carriers, wireless handset and equipment manufacturers and the overall wireless telecom industry, as well as on Ovum’s own independent analysis and research.

 

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