Furthermore, facilities-based wireless carriers paid wireline operators $4.1  million for leased lines for their networks and to terminate calls on the wireline networks. Wireless carriers also paid a substantial proportion of their revenues to the suppliers of support services. These suppliers, together with their own upstream suppliers, generated a value add of $40.4 billion in 2004. In addition, wireless carriers received $12 billion in endusers payments for handsets and related accessories and $900 million in payments from wireline carriers for terminating wireline to wireless calls.

In 2004, end-users purchased a little more than 50 percent of their wireless services, handsets and related accessories from independent retailers such as Best Buy and Radio Shack. Although these end-user payments are booked by the facilities-based carriers rather than by the independent retailers/dealers, independent retailers/dealers receive commission on each sale, and in 2004 these
commissions totalled $9.8 billion, forming the bulk of independent retailer revenues in 2004. In addition, the network equipment suppliers had a value add of $6 billion.

Productivity Gains from Wireless Services
For several decades before 1995, the U.S. lagged both Japan and the European Union in GDP growth. But, over the last ten years, the U.S. has outpaced Japan and the European Union in labor productivity growth. While the Internet and computers have won much of the credit for improving productivity, telecommunications, and especially wireless telecommunications, have become an essential component in generating productivity gains for U.S. businesses. This increased productivity
is leading to substantial gains by U.S. businesses which in turn mean GDP
growth and increased global competitiveness. Looking solely at the use of just five wireless data applications, we estimate that U.S. business users enjoy at least $15 billion per annum in productivity gains. This estimate is very much a lower limit because it is premised on the use of just a few of the currently available wireless data applications.

It is clear that wireless voice services play a central role in enabling productivity growth. Increases in productivity are typically hard to quantify; however, one measure is the consumer surplus generated by the use of wireless voice services. U.S. wireless consumers enjoy far lower rates than users in other parts of the world, particularly Europe. For example, if the average wireless consumer in America spends $54 per month on wireless voice and data services, that same consumer would pay approximately $125 U.S. for the same services in the European Union. Were U.S. carriers to charge at European Union levels, we estimate that the U.S. consumer surplus from wireless services would be halved, demonstrating that U.S. consumers and businesses enjoy substantially greater economical welfare from wireless services than their E.U. counterparts do. We estimate that the use of wireless services in the U.S., largely for voice applications, generated a consumer surplus of $157 billion per annum for 2004.

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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