Last week, the Government received a pre-Budget bonus when ComReg announced the results of the 4G auction. In total, Vodafone, Meteor, O2 Ireland and Three have committed €855 million for the spectrum rights, comprising €482 million immediately and the remaining €373 million to be paid in instalments over the life of the licenses up to July 2030, subject to inflation. Although no exact timetable has been announced, analysts expect that you may be able to avail of 4G services by early 2013. Widespread 4G services are also expected to be available across Britain and other EU countries next year.
So, what exactly is 4G and why might it have economic significance? As the name suggests, 4G is the next step up from 3G in mobile communication technology. I will leave the technological details aside; suffice to say that it will enable mobile phone users to avail of super-fast wireless broadband. Mobile operators have promised speeds upwards of 50 Mbps, which would make using smart phones equivalent to using a computer with fibre optic broadband. As a matter of interest, you can test your own broadband speed at http://www.speedtest.net/
The economic impact of investing in 4G technology could be enormous. In the US, Deloitte Consulting published a report* that suggested US operators could spend between $25 billion and $53 billion in the 2012 to 2016 period on building the 4G network. Using industry-specific multipliers, they estimated that 4G networks could account for $73 to $151 billion in GDP growth and 371,000 to 771,000 new jobs. The wide range in the figures reflects two potential scenarios: (i) a ‘baseline’ scenario where the transition from 3G to 4G stretches into the middle of the decade and (ii) a ‘high-investment’ scenario in which the US invests more rapidly in 4G networks than other countries and gains a competitive advantage by producing more 4G-based devices and services before other countries.
In the UK, Capital Economics have also produced a report** that predicted that UK operators will invest £5.5 billion in 4G networks (excluding the cost of acquiring the spectrum rights). They estimated that 20 per cent of the UK population may get access to super fast broadband through mobile who wouldn’t otherwise have had access via fixed line. Based on their assumptions, they estimated a boost of 0.5 per cent per annum to domestic GDP. While that may not sound that significant, it is equivalent to £75 billion over a decade.
Although no economic impact study has been commissioned in Ireland to date, if we use the UK figure of 0.5 per cent of GDP as a benchmark, the economic benefit should be in the order of €800 million a year. However, given the importance of the Information and Communications Technology (ICT) sector for Ireland, as well as the current lack of high-speed broadband in many parts of the country, the actual yearly benefit may well be closer to the €1 billion mark.
By Cian Twomey, Lecturer in Financial Economics, NUI Galway
- Deloitte Consulting, ‘The Impact of 4G Technology on Commercial Interactions, Economic Growth and US Competitiveness’, August 2011. http://www.deloitte.com/us/impactof4g