What Consumers Want From Mobile Communications in the United States, United Kingdom, Spain, and Japan

Executive Summary

The United States has come a long way in its communications network since the Advanced Research Projects Agency Network, known as ARPANET, was developed in 1969. Designed to link four scientific labs for interoffice communications, that network has given rise to personal computers, the Internet, high-speed broadband, and mobile devices. Using these digital platforms, new applications for economic development, communications, education, health information technology, and smart energy grids are emerging with the goal of connecting people, businesses, and governments.

This burst of innovation has created new marketplace opportunities and challenges. In the American Recovery and Reinvestment Act of 2009, Congress charged the Federal Communications Commission with developing a national broadband policy by February 17, 2010. Legislators asked the commission to outline policies that would be efficient, effective, and affordable, and that would advance the public interest in “consumer welfare, civic participation, public safety and homeland security, community development, health care delivery, energy independence and efficiency, education, worker training, private sector investment, entrepreneurial activity, job creation and economic growth, and other national purposes.”

Our national leaders are devoting special attention to broadband policy because it is vital to our nation’s infrastructure and long-term economic development. Similar to highways, bridges, and dams, communications represent an infrastructure issue that makes it possible for businesses to stay connected, innovate, and create jobs. Just as we need a strong interstate highway system and viable mass transit, we require accessible and affordable broadband so that businesses and consumers can reap the benefits of wireless technology.

In this report, we focus on a key part of broadband policy, i.e., how consumers feel about cell phones and other mobile devices. Consumer sentiments are crucial for telecommunications. The way in which cell phone users see their devices affects how they employ them and what future possibilities they are willing to entertain. Specifically, we look at what people like and don’t like regarding their current communications experiences. We present data on how many people use smart phones and download applications to their mobile devices, what applications they see as important, what frustrations they feel regarding telecommunications access, and what changes they would like to see in the future.

Our project is explicitly comparative in that it investigates attitudes in four different countries (the United States, United Kingdom, Spain, and Japan). These nations represent a diversity of countries in terms of geographic location, political and economic development, regulatory regimes, and broadband policies. By evaluating how consumers feel in places with different characteristics, we see how government policies affect consumer behavior and how policy changes might affect the commercial marketplace.

Spain is a country that despite some protectionism has relatively open architecture in its telecommunications policy. It deregulated telecommunications in the 1990s and ended the monopoly previously held by Telefonica and encouraged it to expand abroad. Its national plan for research, development, and innovation has budgeted annual research and development expenditures at 1.4 percent of Gross Domestic Product, up from its previous figure of 1 percent. It devotes 2.5 percent of GDP to spending on innovation.

Japan is more closed in terms of mobile communications. It has not deregulated its telecommunications markets and does not make it easy for foreign companies to operate there. The country has not embraced smart phones to the extent of other nations. Its telecommunications network has relatively high consumer prices and low levels of cell phone innovation.

The United States and United Kingdom are intermediate systems with a blend of service providers, new technologies, and broadband policies. Each has opened its networks in certain respects, but been criticized for not going further towards telecommunications liberalization. Some consumers have moved towards smart phones, wireless access, and high-speed broadband. But there remain inequities in access based on age, income, and race.

In examining these nations, we find that consumers would like greater applications in mobile communications policies. They appreciate the freedom and flexibility to control applications on their cell phones. Greater ability in mobile communications leads to more extensive use of applications, an increased desire to control applications, and more willingness to pay for relevant applications. Indeed, CTIA the Wireless Association reported in a May 12, 2009 filing with the Federal Communications Commission that 42,000 wireless applications currently exist, and this number is expected to grow over 62,000. With the number of applications rising dramatically, this project suggests a “win/win” potential for the wireless industry. Both large and small service providers could do well under policies leading to more widespread consumer usage.

Among the specific findings of this analysis are the following key points:

1. the United States has the highest utilization rates of the four nations for smart phones and PDAs
2. Spain is the country where consumers are most likely to see cell phones as an extension of personal computers
3. American consumers have a strong desire to choose and control their own cell phone applications
4. in each of the four countries, being able to chat and make cheap international calls on cell phones are the most popular features
5. Spain is the place where the largest percentage of consumers have downloaded cell phone applications
6. the most frequent reasons for not downloading new cell phone applications are lack of interest, cost, or not being able to do so on their cell phones
7. the most common frustrations with cell phones in the United States are the length of service contracts, roaming charges, cost of domestic calls, and lack of desired features
8. the willingness to pay more for new cell phone features is highest in Spain. When you give people more choices, they are willing to pay more because they see the value of their personal investment
9. Americans believe that innovation is driven by new devices made by Apple, Nokia, and Motorola, and new Internet features pioneered by Google
10. the cell phone factor they think is most important is less expensive services from mobile carriers
11. The most popular new cell phone features are games (named by 61.6 percent of Americans), local directories to locate businesses and restaurants (52.9 percent), music (49.8 percent), and chat and instant messaging (39.8 percent)
12. nearly half of Americans (48.9 percent) say they are likely to switch from phone landlines to cell phones and 48.1 percent say when that they are taking a short trip, they are more likely to take their cell phone than a laptop computer
13. 69.3 percent of Americans aged 18 to 29 years are willing to switch from landlines to cell phones as are 53.9 percent of those aged 30 to 49 years. This demonstrates how receptive the “leading generation” of young people are to mobile communications
14. nearly half of Americans earning over $25,000 say they are willing to switch from landlines to cell phones
15. the desire to choose their own cell phone applications is strong across all age, income, and racial categories. We find that 85.6 percent of Asian-Americans want to select their own applications, 76.1 percent of African-Americans do, and 73.9 percent of Hispanics would like to do this
16. young people are the most likely to have downloaded cell phone applications and to believe that having one general purpose mobile device is important to improving cell phones
17. young consumers are the most likely to have added games, music, and social networking to their cell phones
18. African-Americans are very interested in adding music to their cell phones, while Hispanics place a high value on social networking and Asian-Americans emphasize local directories
19. young people would like to add chat features to their cell phones, while Asian-Americans are interested in making cheap international calls
20. the groups most willing to pay more to control their cell phone applications are young people, African-Americans, and Asian-Americans.