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Is the iPad the Next Hummer?

Posted by: Geoff Smith
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Is the iPad the Next Hummer?

I just read the first part of a series of CNN Money articles dealing with the shortage of wireless spectrum in the US.  I’ll be the first to admit that it’s a subject I have not previously considered, and I would bank that the majority of people out there are completely blind to.  Based on the article, the available spectrum to support wireless transmissions is decreasing rapidly.  It is projected that in the near future we could run out of available infrastructure to support our growing consumption for all things wireless.

In the article, author David Goldman states that one reason for the “spectrum crunch” is the tremendous increase in data requirements for newer wireless devices.  He references a Federal FCC agency report that indicates that the iPhone consumes 24 times more spectrum than a traditional cell phone, and the iPad 122 times.

There is a finite amount of spectrum, so as the percentage of these types of devices increases in the market, the quicker we will become spectrum constrained.  And as these devices become lower in cost, and WiFi becomes the standard for consuming other forms of entertainment (ie books, movies, news), the impact will escalate exponentially.

Think about it this way.  We have in large part moved from a paper-based society to electronic, and from hard wired to wireless.  We feel free, able to consume what we want, when we want it, from anywhere we like.  And what is the one constant and required resource for this new societal shift?  Wireless spectrum.

In a few years, we may see a conservation movement to preserve spectrum, similar to that we have seen for other “natural” resources.  The normal course of events generally starts with an impact to our lives, either in cost or availability of that resource.  Think of the energy crisis in 1973 and its impact on the auto market.  Prior to that, cars were not built with any consideration toward fuel consumption.  A 1970’s Chevy Impala had a 6.5 liter V8 and got less than 15 miles to the gallon.  In ’74, people lined up to buy the VW Rabbit, a car that provided between 30-40 mpg.

Could this happen in the wireless market?  Sure it could, if the impact of higher spectrum usage results in higher costs to the consumer.  For example, if you own an iPad, maybe you pay a spectrum surcharge, similar to the gas guzzler tax (started in 1978, a direct result of the ’73 energy crisis), levied against people who purchased less fuel efficient vehicles.  And what if the owners of those spectra decide to further consolidate, and the carrier costs for those devices skyrockets?   Will that stop people from buying spectrum-guzzling devices?  Not all of them, but a portion would probably reconsider.

After all, people still bought Hummers when they came to market in the 90s.  However, when prices for gas started to soar in the first years of the new millennium, sales plummeted.  GM tried to keep the brand viable by creating smaller, more efficient versions, but by then the damage was done.  In 2010, after only owning the brand for 11 years, it was eliminated.

So, put yourself 5 years, maybe 10, into the future.  You are looking at your next wireless device purchase.  Your options vary greatly.  All things being equal, you’ll still be flocking to the Apple store for the iPad X.  But that may change, if the iPad X comes with a 50% higher carrier contract because its data consumption was that much higher.

We may have to learn the same valuable lessons taught to us by the VW Rabbit.

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