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The Surprise Behind the Mobile App Numbers (And What the AT&T-T-Mobile Merger Means to It)

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The next time you download a mobile app, think about the company that produced it. If you guessed it came from a large, California-based company, you're likely wrong. Most mobile apps are actually created by small companies from all across the country.

These are the findings of our recent Association for Competitive Technology study of the top 500 best-selling mobile apps. And this is a fact about America's mobile app market that the Federal Communications Commission completely missed last week when it issued its annual 300+-page report on the wireless industry.

This year's report covers some pretty arcane industry aspects in detail ("Population-Weighted Average Megahertz," anyone?). Yes, it lists some outdated but still eye-opening figures about surging app growth in 2009 and 2010. But it stopped there and unfortunately missed a golden opportunity to inform the nation of the remarkable developments in our mobile marketplace.

Our society is currently undergoing a profound change in the way we access information. We now connect to the internet more through our mobile devices than with desktops - and we can't get enough of the apps they run. There is an app for everything the ads tell us.

Remarkably, the mobile apps used around the world are created overwhelmingly by American small business developers. Our research showed that more than 88% of the most popular apps come from small businesses. In most cases, these companies have fewer than 10 employees.

And the marketplace in which these app developers operate provides tremendous opportunity. The mobile industry now accounts for two percent of the entire global GDP. That's almost as much as the entire world spends on food.

Separately, the app market has become a $20 billion industry spawning job creation across the United States. While California continues to have the largest proportion of app developers, nearly 70% of the top app makers are located outside the traditional tech powerhouses. A programmer for the new top app is as likely to come from Moorhead, Minnesota as from Silicon Valley.

This is a key upside to the wireless industry's build-out of 4G/LTE and is also an important factor in the AT&T-T-Mobile merger. Much is being made about whether this merger would reduce the number of wireless competitors. But in a wireless market where resources are scarce, it is a mistake to focus simply on the number of competitors without factoring in their deployment of new technologies.

Most important to the continued growth of the U.S.-dominated app marketplace is the widespread adoption of LTE. Long Term Evolution (LTE) is the next generation communications platform upon which the future growth of the mobile app marketplace depends. Only LTE provides the connection speed, bandwidth tools, and scalability that our wireless data infrastructure requires.

The real issue for both consumers and tech entrepreneurs is to create as many competitors as possible who can quickly deploy 4G/LTE service across the country. T-Mobile's parent company, Deutsche Telekom, has already announced that it will not spend a penny on LTE, relying instead on outdated technology that is nearing the end of its competitiveness. That will usher T-Mobile's transformation from industry competitor to afterthought pretty quickly.

That decision also means that millions of users will not be able to use the new apps created for this platform and developers will not be able to write and test out new apps using this technology. There is no surer way to guarantee America loses its competitive advantage in the app industry than to deny developers access to the basic resources that our global competitors have.

The potential for app developers to be frozen out of LTE is a big problem everywhere, but felt most acutely in small towns. The AT&T-T-Mobile merger is welcomed by the developer community because of its commitment to fund an additional $8 billion for LTE deployment upon its approval. That would result in a more efficient allocation of wireless spectrum, putting app makers and consumers in rural areas on equal footing with those in larger markets - and with competitors around the globe.

The United States is so spread out that any nationwide network build-out is often problematic. This is one reason why our broadband rankings are so low compared to countries like Korea. To make it practicable, a carrier - any carrier - needs lots of spectrum, in lots of places, including rural communities.

In order to maintain our standing as the world leader in mobile application development the FCC should approve a merger that improves spectrum allocation and creates conditions where application developers can thrive. The AT&T-T-Mobile merger will bring accelerated LTE deployment, setting the foundation for greater public access and the continued growth of app-related jobs and industries.


Morgan Reed is the executive director of the Association for Competitive Technology, an association representing small business app makers and software developers (www.actonline.org).

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