The Growth of the Global Mobile Internet Economy

The Growth of the Global Mobile Internet Economy

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The Growth of the Global Mobile Internet Economy

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    Keeping the Mobile Internet Moving

    The economic benefits of the mobile Internet are big, clear, and undeniable. As we have seen, competition has driven innovation and experimentation that have generated billions of dollars in new economic activity, millions of jobs, and a large and growing consumer surplus. It should be a goal of policy makers everywhere to keep the mobile Internet moving forward.

    To be sure, the disruption that game-changing technologies such as mobile often cause creates issues for consumers and others that require full debate and fair resolution. One of the most important of these involves data privacy, data security, and the ways in which data is used by those that collect it. We have discussed previously the need to balance the potential value that personal data can unlock with the rights of individuals and societies to determine what are, and are not, legitimate uses of data. (See “Rethinking Personal Data: Strengthening Trust,” BCG article, May 2012.)

    There are also concerns about new business models, such as those at work in the “sharing economy” that create considerable consumer value but disadvantage legacy companies that often have to adhere to different sets of rules. Some consumer advocates and others point to the potential for overcharging consumers through in-app purchases and other subscription models, the cost ramifications of which some consumers may not fully understand.

    These are all legitimate concerns. Policy makers can help keep the mobile Internet economy moving by pursuing proven policy goals that can mitigate risks to growth and encourage innovation, value creation, and consumer welfare and choice. Other policy goals should include the following:

    • Promoting investment in expanded coverage, high-speed infrastructure, and affordable mobile Internet access, especially in developing markets

    • Putting a priority on education and skills building

    • Encouraging innovation and entrepreneurial activity

    • Adapting existing legislation or policies to allow for the growth of new business models that create consumer value

    • Encouraging organizations to take a transparent approach to the way that they collect and use consumer data, as well as how they charge consumers for services such as in-app purchases and subscriptions

    In addition, policy makers need to take into account how quickly technologies and the innovations they enable are evolving and, where necessary, modernize regulatory regimes and regulation in ways that support innovation and investment across the entire mobile Internet value chain. Simple, transparent, ex ante policies work best in fast-changing environments. Existing regulations should be reviewed for the possibility of reducing or eliminating rules that impede technological innovation and business model experimentation. And taxation of digital activities should not become an undue burden for the sector, as it may undercut innovation and stunt the growth of independent developers. Governments should avoid, or look for alternative approaches to, adding new regulations or expanding existing regulations to new sectors. In some instances, self-regulation can be a viable option in competitive markets.

    Policy makers also need to recognize that, like individual countries and markets, companies and organizations operating at each layer of the stack face different kinds of challenges. (See “The Mobile Internet Stack,” above.) As we argued in “Reforming Europe’s Telecom Regulation” and “Delivering Digital Infrastructure,” for example, there is a need for reform at the network and infrastructure layer of the stack on major issues facing telcos, such as the availability and harmonizing of spectrum. In other parts of the stack—the operating system; device; and apps, content, and services layers being three examples—the market economy is doing its job quite handily. Competition reigns, prices are falling, innovation is bringing new technologies, products, services, and apps to market at a near breakneck pace. And consumers are realizing a huge and growing benefit. The mobile Internet economy is creating jobs and making a material contribution to GDP.

    The greatest opportunity for transformative economic and social impact is in developing markets. And the biggest challenge in many of these countries is the need to expand access and penetration by constructing basic infrastructure and bringing prices down.

    The economics of many developing economies make infrastructure (as well as other) investments tough. Public-private partnerships are one time-tested method of getting big infrastructure projects off the ground, although it is important to ensure that the capabilities and experience of private market players are not lost and that public-sector involvement does not lead to market distortions. Bridging the divide may require nontraditional and innovative approaches. Google’s Project Loon is experimenting with high-altitude balloons that can beam down an LTE network to “connect people in rural and remote areas, help fill coverage gaps, and bring people back online after disasters.” In Kenya, Microsoft has partnered with the Ministry of Information, Communications, and Technology and a local Internet service provider to bring low-cost Internet access and charging stations to rural communities that lack electricity, using a solar-powered wireless broadband network featuring TV white-space radios. And, a partnership founded by major technology companies, including Ericsson, Facebook, MediaTek, Nokia, Opera Software, Qualcomm, and Samsung, works with governments and NGOs to bring basic Internet services to people who do not have them. Facebook founder Mark Zuckerberg describes it as “the on-ramp for the Internet.”

    Local app development is beginning to take hold in a few developing countries, providing important local-language resources for users. Chinese users already spend far more time on apps developed locally than on those from other countries. Brazilian users are also spending considerable time using locally developed apps. Local digital ecosystems are vital in serving local needs and boosting competition in an increasingly international digital-services market. By maintaining a free and open Internet, governments have a role to play in fostering the development of these ecosystems and enabling compelling app development within them.

    We are still only starting to realize the benefits of the mobile Internet for consumers, businesses, and society. These benefits are built, fundamentally, on competition-driven consumer choice and access. In an age of globally mobile capital and talent, the economies that develop and maintain such markets will see the greatest payback.