Consumers of New Wireless Technology Better Served by Market Competition Than Government-mandated Standard, Economic White Paper Concludes
November 25, 1998
WASHINGTON, Nov. 24 /PRNewswire/Consumers of third
generation (3G) wireless technology will be
better served by marketplace competition
than by a single, government-mandated
standard, according to a new economic
white paper released today by the North
American GSM Alliance.
Written by Joseph Farrell, Professor of
Economics at the University of California,
Berkeley and former chief economist of the
Federal Communications Commission, the
White Paper concludes that "allowing multiple
third generation standards to compete can
create greater product variety and _
stronger incentives for innovation."
"This comprehensive economic analysis
reaffirms our belief in the free market as the
best way for American consumers to obtain
the least costly, most technologically
advanced wireless communication
equipment," said Don Warkentin, Chairman of
the North American GSM Alliance. "Multiple
standards provide companies flexibility to
respond to varying consumer demands and
will allow the manufacturing of all types of
wireless equipment to continue here in the
United States."
Competition Fuels Response to Consumer
Needs
Farrell finds that marketplace competition
provides consumers with a greater variety of
products from which to choose. Competition
in second generation wireless standards, for
example, led to Nextel's Direct Connect
feature, allowing consumers instant access
to conference calls from their wireless
phones. Similarly, the ability of GSM
customers to make calls from almost any
location using the "smart card" is the result
of marketplace competition. The evolution of
CDMA speech coding technology is yet
another example of the benefits of
market-driven innovations.
Nationwide roaming, a purported benefit of a
single standard, is already happening
regardless of a mandated standard,
according to Farrell, because wireless service
providers recognize consumer demand for it.
AT&T, Sprint PCS and Nextel have the ability
to offer seamless, near-national roaming now
and several other firms and alliances are not
far behind. Likewise, manufacturers'
economies of scale will adjust to reflect the
choices made by wireless equipment buyers.
A government mandate is not necessary to
bring about what the marketplace is already
causing to happen, Farrell concludes.
Mandated Standards Stall Technology
Advances
A single, government-mandated standard,
Farrell concludes, would hamper the
industry's ability to respond quickly to new
challenges and opportunities and remove
incentives to improve upon existing
technology. Multiple standards, on the other
hand, avoid "locking in on an obsolete
technology." They provide companies with
the incentive to meet varying consumer
needs and adapt to new ones, and to
constantly search for technological
innovations in the race to outdo their
competitors.
Manufacturing Jobs Created Independent of
Standard Origins
Characterizing wireless manufacturing jobs as
"internationally mobile, " Farrell also calls into
question job creation claims made by
proponents of a single standard.
"Manufacturing jobs and manufacturing
leadership depend on manufacturing
advantages, and do not simply rest in the
country of origin of a standard," he states.
Experience with the U.S.-developed
NTSC-based color television standard as well
as second generation wireless technology
shows that manufacturing decisions are
made independent of standards development.
Both the TDMA/IS-136 and CDMA second
generation wireless standards originated in
the United States, yet major manufacturers
utilizing these standards include Ericsson,
Nokia, Sony, Samsung, and Siemens.
Likewise, while the second generation GSM
standard is considered a European standard
(although based on a number of U.S.-held
patents), Ericsson, Nokia, Mitsubishi, Sony
and Hyundai -- as well as American-based
manufacturers Lucent and Motorola -- make
GSM and CDMA equipment in the United
States and other countries, employing a
significant number of American workers.
Farrell foresees nothing to prevent U.S.
manufacturers from producing equipment
compatible with any third generation
standard adopted by a group such as the
European Telecommunications Standards
Institute. Endorsement of a U.S.-developed
standard would not ensure manufacturing
jobs are created domestically. North
American-based Motorola, Lucent, Qualcomm
and Nortel all manufacture second generation
wireless equipment abroad.
"Requests to base standards policy on
alleged employment advantages of nationally
sponsored standards are unconvincing even
on their own terms: 'foreign' manufacturers
can and do manufacture to 'U.S. standards,'
and foreign and U.S. firms alike manufacture
both in the U.S. and abroad," Farrell
concludes.
SOURCE North American GSM Alliance LLC |
