MOBILE communication services have become an essential part of how economies work and function. Today, the mobile telecommunication sector continues to offer unprecedented opportunities for economic growth in both developing and developed markets.
A series of studies have found a link between mobile penetration and economic growth. Mobile phones have improved communication, enhanced social inclusion, and expanded economic activity and productivity in sectors such as agriculture, healthcare, education, and finance.
Against this backdrop, series of reports have been put up, which have shown a comprehensive and up-to-date analysis of the role that basic mobile phone services play in generating economic growth.
According to the Global Information Technology Report 2013, presented at the World Economic Forum, it revealed that in developing markets, increases in mobile penetration benefit gross domestic product (GDP) growth per capita and boost country productivity.
To the authors, as technology develops, mobile services have the potential of impacting a country’s economy by providing high-value 3G and 4G data services that are accessed via smartphones, tablets, and dongles that deliver mobile data services to businesses and consumers. The relationship among economic growth, 3G telephony, and mobile data use has not yet been explicitly explored.
Indeed, as mobile telephony markets become more mature, the benefits to be derived from basic mobile voice and text services on growth and productivity are achieved.
Although the impact of 2G services is significant, as more developed 3G technology replaces 2G, an incremental economic impact is observed.
Differential economic growth is supported because these technology changes allow consumers and businesses to benefit from high-value wireless data and content services. This relationship had not yet been explicitly quantified yet.
The penetration of 3G technology, measured as the number of 3G connections per 100 people has increased significantly worldwide in recent years: by 2011, 3G penetration had reached over 60 per cent of the population in Western Europe and over 90 per cent in the United States.
Reports have it that there, though it appears slow in Africa, more investments and sound policies will drive its growth.
The report noted that in developed markets, where basic mobile penetration has long exceeded 100 percent, as well as in the higher-income consumer and business user segments in developing markets, a substitution effect has taken place in mobile telephony whereby mobile users who previously consumed standard services have been acquiring 3G connections.
Although this substitution does not necessarily increase total mobile penetration, part of the report quantifies the effect on GDP growth of consumers and businesses substituting a standard 2G mobile connection with a 3G connection.
The econometric approach adopted to measure this effect follows previous work on the impact of mobile model allows us to interpret the coefficient of the 3G penetration variable as the impact of increasing 3G penetration while keeping all other factors equal, including total mobile penetration.
In Nigeria, the approval of the new broadband policy by President Goodluck Jonathan last week is expected to fuel growth of Internet penetration.
Besides, experts posited that the new broadband policy should encourage infrastructure sharing and open up the broadband infrastructure market to foreign and local investors.
A telecoms expert, Banji Adedoyin believed that the policy should facilitate economic growth, which will spur telecoms sector contributions to the country’s GDP.
“The approval of the new broadband policy has rekindled hope that the generality of the Nigerian populace will have access to efficient and reasonably priced broadband Internet service by 2018. The policy however is capable of creating high speed communication network that connects end users at a data transfer speed greater than 256 kilobits per second”, he stated.
The Nigerian broadband policy has envisaged rapid roll out of wireless and wire-line infrastructure as well as provide incentives to encourage a national 3G wireless to at least 80 percent of the Nigerian population by 2018. The policy will ensure a timely release of more frequency spectrum for broadband services especially for LTE (Long Term Evolution), foster attractive investment climate by targeting schemes for stimulating demand and providing targeted concessions, tax incentives and grants to infrastructure builders.
From the World Economic Forum report, central issue of reverse causality between mobile and 3G penetration and income growth with higher levels of mobile and 3G penetration is expected to affect GDP.
The yearly growth rate of real GDP per capita was expressed as a function of the lag of real GDP per capita, 3G penetration, mobile penetration, and a set of four determinants of growth.
These determinants are government expenditure, trade volumes, aggregate investment, and total labor force. All variables have been transformed into logarithmic form.
This analysis finds that, for a given level of mobile penetration and across the whole sample of countries considered, those countries that had a 10 percent higher 3G penetration between 2008 and 2011 experienced an increase in their average yearly GDP per capita growth rate of 0.15 percentage points.
These results indicate that countries with a proportionately higher share of 3G connections enjoy greater GDP per capita growth than countries with comparable total mobile penetration but lower 3G penetration.
For a similar absolute increase in the number of 3G connections, those countries with lower initial 3G penetration experienced a higher impact on GDP per capita growth.
Interestingly, the increase in 3G connections, supported by the proliferation of data-enabled devices that allow mobile Internet connectivity, has led to massive growth in mobile data usage.
The Cisco Systems Visual Networking Index shows that, on average, total mobile data usage has more than doubled every year from 2005 to 2010 in each country in the sample.
For example, in the United States, mobile data usage grew, on average, by 400 percent a year between 2005 and 2010, while in the Western European countries considered, it grew by an average of 350 percent. In countries such as Brazil, China, and India, total usage has also more than doubled, on average, every year since mobile data was introduced.
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