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1 1 2 1 STATE OF CONNECTICUT 2 3 SITING COUNCIL 4 5 6 7 8 9 10 11 12 13 14 15 CELLULAR SYMPOSIUM 16 17 RE: CTIA REPORT: IMPACT OF THE U.S. 18 19 WIRELESS TELECOM INDUSTRY ON THE U.S. ECONOMY 20 21 MARCH 2, 2006 22 23 (11:30 A.M.) 24 25 26 27 28 29 30 31 32 33 34 35 THE BUSHNELL PERFORMING ARTS CENTER 36 37 HARTFORD, CONNECTICUT3 4 5 POST REPORTING SERVICE 6 HAMDEN, CT (800) 262-4102 1 2 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 . . . proceedings of a Cellular Symposium 2 held by the State of Connecticut Siting Council at the 3 Bushnell Performing Arts Center on March 2, 2006.4567 MR. S. DEREK PHELPS: Our next speaker is 8 Mr. Roger Entner. Mr. Barrone, are we geared up and 9 ready?10 Some time ago when I was putting together 11 this program, I was assembling it largely as a technical 12 workshop series of sessions that addressed the challenges 13 of propagation and as you just heard the challenges of 14 providing for coverage off of specific types of facilities15 and, you know, the advantages and the disadvantages 16 associated. But before long, I began to realize that the 17 -- one component that I think maybe was in need of being 18 addressed today, especially from a policymaker’s 19 perspective, was the subject matter of what the industry 20 means today, what its potential impact may be in the 21 coming years, and certainly where it has come from in 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 3 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 terms of its impact on the economy. And so I’m pleased to2 say that we were able to identify what I think is an 3 excellent speaker who’s come here today to address that 4 subject. He is here representing what we refer to as the 5 wireless association, the CTIA. And what he’s going to 6 discuss today is a synopsis of a recently published report7 by the wireless association that measures the economic 8 impact of the wireless industry upon the nation and its 9 predictions for the next 10 years.10 Ladies and gentlemen, would you please 11 join me in welcoming Roger Entner, Vice President, 12 Wireless Telecoms for Ovum on behalf of the wireless 13 association.14 (Applause)15 MR. ROGER ENTNER: Thank you very much. 16 And I’m also the guy who stands between you and lunch and 17 a much better looking speaker, Leslie Cauley, who will 18 follow me.19 So here we did a report for CTIA that 20 actually for the first time quantified the impact that the21 wireless industry has on the U.S. economy, because, you 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 4 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 know, you hear every day -- you know, even Allen Greenspan2 saying, oh, the internet just did all these wonderful 3 things for the economy and all the boom in the 1990’s is 4 all due to the internet. But actually at the same time 5 another boom actually went on, and that’s wireless, and it6 has also quite a significant impact.7 So what we looked at here first is we 8 looked both at the supply and the demand side of the 9 wireless industry. And on the supply side we have that 10 through wireless usage, you know, you have an increase in 11 GVP employment, government revenues you know, all of your 12 tax -- well some more, some less -- wireless users. And 13 then on the demand side because it also enhances 14 productivity, there’s not only idle chatter going on, but 15 really a lot of business use. And then you have both 16 wireless voice and wireless data.17 One of my predecessors speaking here 18 mentioned, you know, the increase in subscribers but also 19 in usage. You know, if we look at just from the beginning20 of 2000, we had about a hundred million users, and now we 21 have more than two hundred million users. Minutes per use6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 5 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 that each of these individuals have used went up from 2 maybe 200 minutes a use to over 800. That’s, you know, 3 quite substantial. We are rivaling now what people are 4 using through their land line numbers. And on a land line5 there are 2.3 people actually talking and on a wireless 6 phone one person is talking.7 So we then went -- just to give you a 8 brief methodology -- I went through all 9,267 different 9 job classifications that the Bureau of Labor Statistics 10 segregates all into and defined what are the jobs that 11 will have a benefit from going wireless and what are not. 12 And we found that about 60 million people will actually 13 find a benefit from it. And then we did really a hard 14 analysis on the productivity savings. Not the 15 productivity enhancements, but really what time do they 16 use and how much labor will that cost less, because that 17 takes all ambiguity out there because the BLS also surveys18 everybody and finds out that the proverbial plumber makes 19 this and the CEO makes that. And then you can estimate or20 actually through case studies, you have businesses 21 reporting back -- you know, a nurse with a cell phone 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 6 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 actually saves four hours a week, and then you can say 2 okay four hours a week, the person makes X dollars, that’s3 this productivity savings that they can use somewhere 4 else. So what we found here actually is over the next 10 5 years there will be more than 617 billion dollars in 6 productivity savings.7 On top of it there’s a consumer surplus of8 750 billion. Consumer surplus in layman’s terms -- and 9 you know, I’m almost -- with my very capable predecessors,10 I always felt like, you know, I’m blinded by science, so I11 try not to do that too much. Consumer surplus is 12 basically the difference between what you’re actually 13 paying and what you would be willing to pay for the same 14 amount of usage. So we basically compared what Americans 15 are paying for this service and what equivalent they would16 pay for it if they would live in Europe, which is as close17 as we can get. So on average an American user spends 18 about $55.00 and talks about 800 minutes. If they would 19 live in Europe, they would have to pay $125.00 a month for20 exact -- for getting exactly the same. So that translates21 into 750 billion dollars.6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 7 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 On top of it, because the industry is 2 growing and then, you know, all the engineers are building3 houses and so construction workers. They pay taxes, so 4 more government officials, and so on and so forth. So the5 impact of the industry, you know, that turns into about 6 another 450 billion dollars, you know. To put this in 7 context, the Bush tax cut over 10 years was 670 billion 8 dollars, so that’s roughly the same impact. And it’s, you9 know, more than twice as big as the repel of the state tax10 over the same time period.11 So here we looked at the productivity 12 benefits when we go through it. And you know, in -- in 13 2004 it was only, only about eight billion dollars. 14 That’s roughly the size of the economy of Bahrain, one of 15 the oil sheikdoms in the Pacific -- not Pacific -- Persian16 Gulf. By 2015 this will grow to more than 80 billion 17 dollars a year. You know, which is roughly as big as 18 Chile or the Philippines. So you have one industry in the19 U.S. that is really the size of another economy. So -- 20 and as I mentioned before, it’s -- basically, we looked at21 the savings that people do. So your proverbial tree 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 8 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 cutter makes $12.68 an hour. So we counted the -- however2 many hours they saved a week by them calling in and 3 saying, hey, I cut Roger’s tree and now I’m going -- where4 should I go next, and then they can direct them directly 5 and route them in the best way. And so we counted these 6 savings.7 I think what’s also very important to 8 mention is, you know, with the industry growing that big, 9 is that the industry -- 200 million users, 110 billion 10 dollar in revenue, so it’s also a huge economy, but 11 they’re just free cash flow positive. Free cash flow 12 positive means they’ve started paying back their debt they13 accumulated over the last 20 years bringing us these 14 services. So the industry, while some people think and 15 actually treat it like the golden goose, is actually only 16 paying back the debt they accumulated over 20 years 17 building these networks. And I think that’s very 18 important to know as well.19 So if we look at the future economic 20 benefits, you know, we put it in two -- the two major 21 components we found were actually more efficient 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 9 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 management and documentation and health care efficiency 2 benefits. It’s -- and those are by far the two biggest 3 contributors. When I started out the study, I didn’t 4 think it would -- that these two would be actually the 5 biggest one. And they contribute probably, you know, 75 6 percent of that. Then it’s followed by field service, 7 automation, inventory, loss reduction, and field sales.8 So -- by the way, if you have any 9 questions, just interrupt me. I’m easy. I don’t like 10 pontificating. I’m much more -- I’m much better, much 11 more fun when we’re interactive, so go ahead.12 So -- as I mentioned, it’s a 110 billion 13 dollar industry, but the GVP impact is 92 billion dollars.14 Where do the other 18 billion dollars end up? They 15 actually end up due to the handsets because they basically16 get manufactured overseas. We don’t have anybody actually17 making handsets here any more. So all the brain work 18 happens here with Motorola and a lot of the other firms, 19 but actually it’s manufactured then overseas. So every 20 day -- literally plane loads of handsets come into this 21 country. And -- you know, I’ll spare you the details.6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 10 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 Go ahead. So you know, coming back to the2 consumer surplus, you know, it’s -- you know, at the end 3 of ’04 it was about 157 billion dollars. And all of it is4 basically voice because that’s the most widely used 5 service. In ’04 we had -- you know, we had -- about one 6 or two percent of revenue from the carriers was wireless 7 data. Now it’s more than five percent. You know, $55.00 8 as I mentioned before, ’04 -- and this is just for the 9 year ’04 -- it was, you know, a dollar or two. Now we’re 10 seeing four, five, six dollars even per user over -- spent11 over the whole base. Somebody who is actually actively 12 using data is spending 10, 12, $15.00 a month. Quite -- 13 quite interesting. But at that time in 2004 we didn’t 14 have that. So by 2010 we expect that to grow to about 26015 billion dollars with voice volumes to triple and prices to16 half. And so it’s over 200 -- 300 billion by 2015, you 17 know.18 By the way, another interesting factoid, 19 in 2001 the effective price per minute -- so basically 20 what you do is you divide what you pay per month by how 21 many minutes you use -- that was in 2000 about 22 cents 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 11 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 per minute. What do you think where are we today? 2 Anybody?3 A VOICE: Five cents --4 MR. ENTNER: Hmm?5 A VOICE: Less than 10 cents?6 MR. ENTNER: Yes. We’re now down to below7 seven cents per minute. So that is actually -- now it’s 8 -- on an effective basis it’s cheaper to do a wireless 9 call than it is to do a land line call. So that’s how far10 we have come in the industry.11 So now we go into a little bit more 12 details in the supply side effect. I’ll spare you this. 13 (Laughter). So -- if you want to have a -- if you want to14 have a copy -- e-mail -- or ask Derek if you wanted to 15 just give me a call or send me an e-mail, I’m happy to 16 send that to you. But basically this is about all the 17 different bits and pieces, who gets what money from 18 consumers. And the industry -- and in the end, the value 19 that the U.S. industry and the carriers are actually 20 creating is about 22 billion dollars.21 Okay, go ahead. So coming back to the 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 12 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 industry and putting it in size of the impact it actually 2 has, it -- it -- in 2004 it was 20 percent smaller than 3 the computer industry; roughly the same with publishing; 4 it was actually more than twice as big as the movie 5 industry; almost as big as agriculture or automobiles; and6 you know, more than twice as big as the oil industry, and 7 it got the worst rap and the less least pool of all the --8 of all the industry out there. And it probably made a lot9 more people happy than going to the pump.10 Anyway -- go ahead. So here we look at 11 also the impact on jobs and the U.S. economy. So direct 12 employment is -- is a bit over half a million -- million 13 people. Then we have about another one and a half million14 people in support services. So these are the people that 15 build the towers, that are servicing the towers, that are 16 providing content to -- that we watch on the television or17 that make the software that makes the things run. 18 Indirect employment is now the people that feed all the 19 engineers who are hungry and do wonderful things. And 20 then the induced employment is what then feeds off of 21 against it, which winds up into 3.6 million people that 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 13 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 are directly and indirectly impacted actually by that. So2 it’s -- if you translate it into Connecticut, so basically3 every -- every wireless company employee basically 4 supports, you know, around seven other employees. So you 5 know, help the wireless companies bring jobs here, you get6 seven jobs out of it.7 Anyway, go ahead, the next one. Sixty-8 three billion dollars in government revenue is generated 9 every year by the wireless industry -- or at least in 10 2004. With subscribers going up, this goes up as well. 11 14.6 billion in federal, state, and local sales tax, 12 transaction taxes, surcharges, you name it. Wireless in 13 terms of percentage taxation ran -- runs pretty close to 14 alcohol, gambling, and other sinful things. (Laughter). 15 Wireless users -- you know -- and the first wireless users16 we had in the U.S. was in 1980, also paying for the 19-- 17 the 1898 foreign war tax where we’re still paying for the 18 expenditures for the war against Spain where we liberated 19 Cuba. So we’re still paying for that war. I don’t want 20 to know what happens with the Iraq war, that was a little 21 bit bigger in scope and longer, you know, when they put 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 14 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 taxes on it.2 So about a billion dollars then in sales 3 tax is on handset purchases; 9 billion both from employer 4 and employee paid social security; 26 and a half billion 5 from workers dependent on the industry; and about 2.6 6 billion dollars for USF. The wireless industry is already7 paying more than 30 percent of the USF fund. So it’s -- 8 go ahead, sir.9 (QUESTION FROM THE FLOOR)10 MR. ENTNER: In 2004 there were no 11 spectrum auctions, so we didn’t put it in there. You 12 know, a small auction runs about a billion dollars. A big13 auction like -- Auction 35, actually never happened, was 14 16 billion. There’s another auction coming up in June and15 the federal government hopes to get at least two billion 16 dollars out of it. But you know, two billion -- you know,17 a billion, two billion dollars in a -- you get -- the 18 government gets more in handset sales taxes than on some 19 auction. So it -- while it’s a really big -- well, you 20 know, a billion here, a billion there -- you talk about 21 real money and I would take it in a heartbeat -- but in 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 15 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 the big scope of things, it’s not that much actually.2 Go ahead. Okay, and that concludes my 3 comments. So if you have any questions, I’m very happy to4 answer you.5 (Applause)6 MR. ENTNER: Yes, ma’am?7 (QUESTION FROM THE COUNCIL)8 MR. ENTNER: Yes.9 MR. PHELPS: Restate it please.10 MR. ENTNER: If the numbers included also 11 real estate taxes on the sites. Yes, it does. Yes, sir?12 (QUESTION FROM THE FLOOR)13 MR. ENTNER: Okay, go ahead, go back.14 (QUESTION FROM THE FLOOR)15 MR. ENTNER: Yes, because it’s 22 and a 16 half billion dollars in value added, which the industry 17 used to pay the debts it has accumulated over 20 years of 18 loss making.19 MR. PHELPS: Alright, one more time 20 restate the question.21 MR. ENTNER: If -- if -- (laughter) -- 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 16 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 okay, sorry. If the numbers that are going into the 2 wireless carriers are bigger than the numbers that are 3 flowing out? And yes. And it’s exactly by the 22 and a 4 half billion that’s in the middle of it. And that’s used 5 to pay all the kind people that borrow -- or that lend 6 money to the wireless industry over the last 20 years. 7 Yes sir?8 (QUESTION FROM THE FLOOR)9 MR. ENTNER: If you want to have that 10 study done again, send an e-mail to Steve Lodgent 11 (phonetic) at CTIA -- (laughter) -- and I’m happy to 12 oblige. So we’re currently talking --13 MR. PHELPS: I’m going to ask you --14 MR. ENTNER: So the question was if we’re 15 doing this again? And -- and how it looks like when 16 things are changing? And I said -- this was a 2004 17 snapshot and please e-mail Steve Lodgent, who is the CEO 18 of CTIA, if you want to have this done for 2005.19 So -- if -- if we look at carrier -- or 20 going through significant changes, Cingular, for example, 21 built a completely new UMTS network, and from a 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 17 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 traditional three, four-billion dollar, actually spent 2 seven billion dollars. A boat load of money, no doubt 3 about it. It drowns a little bit in the massiveness of 4 everything else. So the -- you know, we have to remember 5 that the industry collectively spends 25 billion dollars. 6 So a quarter of their revenue every year they build -- 7 they spend on building and expanding their network either 8 by expanding coverage, improving -- improving capacity, or9 providing new services on it; now if you not only want to 10 talk but you want to watch a movie or a clip on your 11 handset, you can do that to. Yes, sir?12 (QUESTION FROM THE COUNCIL)13 MR. ENTNER: Yes. If broadband wireless 14 was included in this -- in this study? What we’ve done 15 here is we really tried to be as conservative as humanly 16 possible. So what we did is we -- with our projections is17 we said okay we’ll freeze the productivity gains that 18 people saw in 2004 and do not assume that they got smarter19 and figured out better ways how to do it, but simply that 20 -- and simply go from, you know, five to ten million 21 people that are using it to about 50 million people. So 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 18 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 we -- we incorporated more people doing the same thing 2 they did in 2004 by -- what I didn’t want to do is put a 3 lot of personal, you know, beliefs and projections in it, 4 but be as conservative as -- you know, some of the other 5 studies I saw, you know, put like things -- every e-mail 6 an average person get is $5.00 and every e-mail a CEO gets7 is $50.00. How they came up with that number, I don’t 8 know. If I get another ad for Viagra, sorry, it’s not 9 worth $5.00 to me -- (laughter) -- and it doesn’t enhance 10 my productivity either. (Laughter). So -- (laughter) -- 11 maybe -- maybe Mr. Doles, but that’s another topic.12 Anyway, so we really tried to be really 13 very conservative here, so that’s why we didn’t include 14 that.15 MR. PHELPS: One more question please.16 MR. ENTNER: One more question -- or if 17 you’re hungry, I’ll let you go. Thank you.18 (Applause)19 MR. PHELPS: Ladies and gentlemen, that 20 concludes our morning sessions. For those of you who 21 registered, which I think includes most of you, we have a 6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102 1 19 2 RE: CTIA REPORT 3 MARCH 2, 2006 4 5 1 luncheon that will be served featuring our keynote speaker2 Leslie Cauley. That’s in the great room that’s just about3 a hundred steps to the east of this building. I look 4 forward to seeing you over there and thank you for being 5 such a good audience this morning.67 (Presentation concluded)6 7 8 POST REPORTING SERVICE 9 HAMDEN, CT (800) 262-4102

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