Innovation in the Wireless Ecosystem: A Customer-Centric Framework

Abstract

The Federal Communications Commission’s Notice of Inquiry in GN 09-157 Fostering Innovation and Investment in the Wireless Communications Market is a significant event at an opportune moment. Wireless communication has already radically changed the way that not only Americans, but people the world over communicate with each other and access and share information. In this article, we review the wireless industry’s past performance in three dimensions: (i) the rate of innovation, (ii) how competitive the industry is, and (iii) how competitive wireless innovation is. We do so by examining the record of three key layers in the industry’s vertical chain: software applications, devices (handhelds), and the core wireless distribution networks. We find that all three markets exhibit very high rates of innovation, that the markets are competitive, and that this competition has driven innovation. As in previous work (Faulhaber, 2009a) we argue that, absent market failure, regulatory intervention is not appropriate. A customer-centric perspective should govern the FCC’s actions in the wireless ecosystem: let customers decide what they want in this competitive market.

Keywords: wireless, FCC, customer-centric, innovation

JEL Classification: L51, L86, L96