The compound interest of innovation: Wi-Fi and the power of unlicensed spectrum

Investors understand the power of compound interest. Over time, small gains accumulate into exponential growth.

Innovation often works the same way. One breakthrough creates the foundation for the next, which enables another. Over time, innovation compounds, producing transformative economic and technological change.

Few technologies better demonstrate the compound interest of innovation than Wi-Fi.

In 1985, the Federal Communications Commission (FCC) took a novel and consequential step. It opened three spectrum bands for unlicensed use. At the time, these spectrum bands were dismissed as “junk bands.” Yet those supposedly worthless bands were put to many productive uses, including Wi-Fi.

While exclusive-use licensed spectrum forms the core of modern mobile networks, Wi-Fi relies on portions of unlicensed spectrum that anyone can use on a nonexclusive basis. This spectrum is also decentralized: there are no license payments or centralized control for users, though Wi-Fi devices remain subject to FCC certification and certain technical requirements.

This openness allowed Wi-Fi to proliferate and drive affordability. Coffee shops, hotels, airports, hospitals, libraries, and countless other locations routinely offer Wi-Fi at no cost. And a single residential broadband subscription can serve an entire household with many connected devices. The average home now has more than 21 connected devices, each connected at no incremental cost.

The result is extraordinary consumer value and affordability.

In 2020, when the FCC opened an additional 1,200 MHz of spectrum within the 6 GHz band for unlicensed use, the agency found that unlicensed devices relying on Wi-Fi and other technical standards had “become indispensable for providing low-cost wireless connectivity in countless products used by American consumers.”

The educational benefits alone are substantial. In a survey of more than 16,000 undergraduate students across 71 US institutions, 96 percent said that Wi-Fi was the most important technological feature for studying. Wi-Fi has transformed how teachers and students communicate, allowing them to safely share homework, documents, and files over a school’s network.

Business applications are also significant. A recent report by ABI Research shows an increase in Wi-Fi usage across business and enterprise environments. The report found that “virtually all business, from sprawling multinational enterprises to independent mom and pop shops, depend on Wi-Fi for daily communications and commerce.” It concluded that Wi-Fi serves as a “key enabler” of the disruptive innovations that will define tomorrow’s economy.

Health care is another example. Wi-Fi-enabled telehealth services allow medical professionals and patients to communicate more efficiently and conveniently, saving both money and time. A recent study found that 71 percent of Americans are comfortable receiving virtual care for the treatment of common mild illnesses, while that 66 percent are comfortable using it for chronic disease management.

These innovations emerged because policymakers created an environment where entrepreneurs and technologists could experiment freely. One innovation led to another, and then to another – compounding over time into a communications ecosystem that has transformed modern life.

The lesson for policymakers is straightforward.

Innovation flourishes when government creates space for experimentation. The success of Wi-Fi and unlicensed spectrum demonstrates the extraordinary economic and consumer benefits that openness, flexibility, and light-touch regulation can produce.

That is the compound interest of innovation.