The Economics of Disruption: $96 Billion Annually at Risk [by LightSquared]

The Economics of Disruption: $96 Billion Annually at Risk

http://www.gpsworld.com/gnss-system/the-economics-disruption-96-billion-annually-risk-11825

June 28, 2011 By: GPS World Staff

“The Economic Benefits of Commercial GPS Use in the United States and
the Costs of Potential Disruption” was presented by Nam D. Pham, Ph.D.,
of NDP Consulting, during a June 21 webinar sponsored by the Coalition
to Save Our GPS.

The author stated that his study concentrated on GPS use in precision
agriculture, construction, and surveying. It explicitly does not
encompass GPS use in aviation, nor in the consumer sector, nor in timing
or financial infrastructure.

The report states: “The direct economic benefits of GPS technology on
commercial GPS users are estimated to be over $67.6 billion per year in
the United States. In addition, GPS technology creates direct and
indirect positive spillover effects, such as emission reductions from
fuel savings, health and safety gains in the work place, time savings,
job creation, higher tax revenues, and improved public safety and
national defense. Today, there are more than 3.3 million jobs that rely
on GPS technology, including approximately 130,000 jobs in GPS
manufacturing industries and 3.2 million in the downstream commercial
GPS-intensive industries. The commercial GPS adoption rate is growing
and expected to continue growing across industries as high financial
returns have been demonstrated. Consequently, GPS technology will create
$122.4 billion benefits per year and will directly affect more than 5.8
million jobs in the downstream commercial GPS-intensive industries when
penetration of GPS technology reaches 100 percent.

Further, “the GPS industry directly creates jobs and economic
activities, which spur economic growth. Evidence shows that innovative
industries, such as the GPS industry, create both high- and low-skilled
jobs during economic expansions and downturns, pay their employees
higher-than-national-average wages, raise output and sales per employee,
increase U.S. competitiveness, which is reflected in increased exports
and reduced U.S. trade deficits, and spend large sums on R&D and capital
investment. In addition to creating these direct economic benefits,
innovative industries create productivity benefits to the downstream
industries, including increased sales, profits, and investment returns.
Empirical studies have shown sustained productivity benefits support
further growth and job creation in downstream industries and the U.S.
economy as a whole.”

Finally, “The direct economic costs of full GPS disruption to commercial
GPS users and GPS manufacturers are estimated to be $96 billion per year
in the United States, the equivalent of 0.7 percent of the U.S. economy.
This annual total cost is the sum of $87.2 billion and $8.8 billion
imposed on commercial GPS users and commercial GPS manufacturers,
respectively. GPS user costs consist of $67.6 billion per year in
foregone GPS benefits — increased productivity and input cost savings —
and another $19.6 billion book value of investment losses in GPS
equipment. GPS manufacturer costs consist of $8.3 billion per year in
foregone commercial GPS equipment sales and an additional $0.55 billion
per year in R&D spending and associated costs to attempt to mitigate the
so-called LightSquared Problem.Systemn

“If the operation of LightSquared will disrupt 50 percent of commercial
GPS equipment, the direct economic impacts are expected to be $48.3
billion per year. Except the R&D spending and the opportunity cost of
R&D spending performed by GPS manufacturers to find attempt to mitigate
interference, direct economic costs to commercial GPS users and foregone
GPS equipment sales are assumed to be half of total direct costs under
the scenario of 100 percent degradation. In addition to direct economic
impacts, there are other forgone direct and indirect economic and social
benefits that are threatened by the LightSquared Problem. On the
macroeconomic level, GPS disruption would reduce productivity and,
consequently, hinder the competitiveness of GPS downstream users.”

See:
http://www.gpsworld.com/gnss-system/the-economics-disruption-96-billion-annually-risk-11825

Figure 1. Revenue shares of GPS equipment in North America, 2005–2010,
according to Bone, Dominique and Stuart Carlaw, 2009, “Global Navigation
Satellite Positioning Solutions,” ABI Research; and authors’ estimates.

See:
http://www.gpsworld.com/gnss-system/the-economics-disruption-96-billion-annually-risk-11825

Figure 2. Commercial GPS equipment revenues in North America, 2005–2010,
according to Bone, Dominique and Stuart Carlaw, 2009, “Global Navigation
Satellite Positioning Solutions,” ABI Research; and authors’ estimates.

My my.
And estimated to be under $67.7 billion?

The wonders of economic science never cease,

Jan