Sunday, September 23, 2012

How @JustinBieber will Stimulate the Economy

I used to have some real problems with Justin Bieber.

Time after time, I cursed him as I tried to download documents to my phones. Even with two blackberries on two different networks, I could be within the national beltway and still struggle with one bar... waiting and waiting for signal. And it was all his fault. After witnessing my niece and countless other young ladies streaming Bieber videos to their phones, I held the Beebs personally responsible for my delays. His fans are hogging our bandwidth.

Recent events have me feeling a lot more positive about the Beebs. Thanks in large part to him, there is an impending mobile bandwidth crisis in America... and that is a good thing. It will create jobs.

Currently, the smartphone market is white hot in the US; hundreds of thousands of adoring iPhone fans are lined up on sidewalks awaiting the latest gadget. This telemania (sorry, that's the best I could think of) isn't really stimulating the economy- most of those devices are manufactured abroad. Sure, there are a few sales jobs, some of us can profit by the stock, and somewhere within the halls of Apple and Google, some very clever and high-paid engineers are designing next-generation products that will speak even more directly to our pleasure centers. But these jobs are few and far between- we don't see iPhone assembly lines popping up in Detroit, for example. That's a problem.

Another factor to consider is that Apple and Google have huge amounts of cash collecting dust; yes, they must finance some R&D and marketing, but there are significant fractions of a trillion dollars awaiting a strategy. I believe that strategy will reveal itself very soon.

In terms of jobs growth, the impending bandwidth crisis could be very good for America. We have to remember that the US has a very widely distributed population, and coverage is already spotty in many areas, even at 3G levels. The mobile market needs more bandwidth- much, much more.

Here is some data indicating the problem that the US faces:

US and Canada Drop in Broadband Penetration Worldwide - January 2012 Bandwidth Report

What does it mean? Well, first of all, notice that most of the nations ahead of us have much higher population density, so the comparison isn't quite fair. Higher population density implies better coverage and more bandwidth per dollar invested in telecom infrastructure. A fairer comparison might be, for example, the state of New York. Nevertheless, it is clear that we need a lot more infrastructure to support bandwidth and coverage.

This population density chart reveals quite clearly where the mobile market can be expected to grow most rapidly:

Global Population Density Map

.. the US. The slow access across the US points to an urgent need for new infrastructure to support coverage and bandwidth. Hence, I expect that the strategy behind the hoarding of cash by the likes of Apple and Google will very soon end: to compete, they must take a real stake in improving internet access across the country. And their interest in making the big investments should be juiced by the appearance of inflation, spiked by QE and lack of leadership on the debt problem in Congress (apparently, the brilliant strategy is simply to inflate ourselves out of our debt problem, but I digress). Reflation should, theoretically, encourage a transformation of cash into physical assets. You don't let billions of dollars inflate into vapor- you invest it in stock and hard assets.

So... I have come to terms with Bieber. Thanks to him, we need more coverage and more bandwidth- a lot more. The business case is clear, and the cash to make it happen is there. And so, finally, we should begin to see domestic jobs growth associated with a need for real, physical infrastructure in the US- akin to our need for highways and railways in prior times. While the iPhones and other devices themselves don't create any sustained jobs, our hunger for bandwidth certainly will.

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