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November 14, 2011

eBay Says Inadequate Mobile Broadband is Holding Back Growth

By Gary Kim, Contributing Editor
As the Federal Communications Commission shifts universal service programs to support broadband access rather than voice, the European Commission pushes for ubiquitous 30-Mbps service across the community, with a further objective of 100-Mbps service for roughly half of potential consumers by 2020, it is fairly clear that there is widespread support for the idea that faster broadband can have important economic and social benefits.

eBay (News - Alert), for example, says patchy mobile network coverage, slow connection speeds and poor reliability is costing the U.K. economy £1.29 billion per year in lost sales. What isn’t so clear is whether those lost mobile sales represent a simple substitution for retail spending that would have occurred otherwise, or whether some percentage of the mobile spending actually is incremental to overall retail spending.

“The reliability of mobile broadband currently significantly inhibits m-commerce sales,” eBay said in a ‘Mobile Manifesto’ submitted to Ofcom, the U.K. communications regulator.

Mobile shopping could deliver a £4.5 billion boost to Britain's economy by 2016 and a further £13 billion by 2021, eBay claims.

The research shows that 16 percent of the United Kingdom is an “m-commerce not-spot”, where mobile spending is at least 20 percent below the national average. Sparsely populated areas, such as the Scottish highlands and islands, rural Wales and rural counties of England are the worst affected.

But the evidence also shows that mobile shopping is under performing in certain heavily populated areas like central London, with broadband reliability and coverage acting as a brake on the potential mobile retail market.

More than a third of consumers have failed to complete a purchase on their mobile due to issues with mobile broadband. Among the top issues are network coverage (79 percent), the reliability (85 percent) and speed (86 percent) of mobile internet connections rank highly as barriers to mobile shopping.

Logic suggests that there is some positive relationship between broadband availability and economic growth, though it is hard to separate “causal” from “correlated” effects.

“We estimate that between 1998 and 2002, communities in which mass-market broadband was available by December 1999 experienced more rapid growth in employment, the number of businesses overall, and businesses in IT-intensive sectors,” say researchers William H. Lehr, Carlos A. Osorio and Sharon E. Gillett of the Massachusetts Institute of Technology and  Marvin A. Sirbu, of Carnegie Mellon University.

Connected Nation (News - Alert) likewise argues that broadband promotes economic growth. The Organization for Economic Cooperation and Development also concurs.

But some might argue that the relationship between economic growth and broadband is not so clear.  

Just about anybody likely would argue that a 100-Mbps network is better than a 50-Mbps network. The rub is that it is harder to determine whether 50-Mbps wireless networks might be even better, or whether 50-Mbps fixed or wireless networks would provide more economic growth and welfare than 100-Mbps fixed networks.

Angus McCarey, UK Retail Director for eBay UK said “mobile shopping represents a massive opportunity not just for retailers, but for the economy as a whole. But our research shows that consumers and retailers are missing out as the cost and reliability of mobile broadband prevents shoppers from spending.”

Mobile continues to be the fastest growing part of eBay's business, with global mobile sales set to double again in 2011 to over $4 billion. More than 16 million people use their iPhones to shop through eBay.

“At eBay in the UK we now see around 10 percent of sales transacted on mobile devices, but we need the right infrastructure in the UK to match this demand,” Miriam Lahage, vice president of global fashion at eBay, stated.

“M-commerce sales are already worth some £1.35bn to the UK economy, and are set to grow fourteen-fold over the next ten years,” to £19.26 billion by 2021, said eBay.

Still, most observers would tend to agree that faster broadband is better, with an impact on economic growth that might be causal or correlational, but with at least some element of causation.


Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Jennifer Russell
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