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The Impacts of Broadband Research Findings from the Broadband Economists

Michael Curri Doug Adams

President Head of Communications

Blandin Foundation Conference WebinarNovember 8, 2012 - Minnesota

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WE ARE a global leader in broadband planning for socio-economic development

WE PROVIDE data and insights to increase broadband utilization and impacts

WE DELIVER strategies for economic development and community transformation through broadband

Some of our clients:

2

We are the “Broadband economists”

UK Department of Trade and Industry

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Revenues from client subscriptions- Investment and maintenance costs

= PROFIT

Operators

Local Economy

Increased productivity and competitiveness, increased revenues, new jobs,

better quality of life, etc.- Investment, maintenance, support

= BENEFITS FOR THE COMMUNITY

3

Why we Build Broadband Networks

“Off- balance-sheet”

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Broadband Direct ImpactsBenefits from the Digital Economy

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5

Broadband’s Profound Impact on Job Creation

Percent of New Jobs Related to InternetBy Size of Employer Group

Broadband is responsible for 22.4% of all new jobs

Source: SNG Digital Economy Database n = 3,574 from NC, VA and KY collected in 2010-12 © S

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1 - 1

9

20 -

99

100

- 449

500

or m

ore

Tota

ls

0%

5%

10%

15%

20%

25%

30%

35% 31.5%

21.4%23.1%

19.2%22.4%

Employees

Small businesses create 12x more

Internet jobs relative to large

firms

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6

Broadband and Communities

Broadband retains and attracts population and businesses

38% of households said they would definitely, or likely, relocate if broadband was not available

72% of home-based businesses say broadband was essential for their business

32% of households have a home-based business, with 14%

planning to start one in the coming year

55% of business and organizations said broadband is essential for

remaining in current location

Source: SNG Digital Economy Database n = 34,000

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Economic ROI from Public Investments in Broadband

Contribution to GDP 10 x the initial public investment

Number of Jobs created and saved Variable

Fiscal revenues increase 3 to 4 x the initial public investment

7

ROI from Broadband Networks

SNG projects have revealed common return on investment (ROI) multipliers from broadband investments

Average multipliers identified from economic impact studies conducted by SNG.

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Build It and They Will Come???? The Marketing Theory Behind Why

Building Is NOT Enough

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Utility vs.Technology

9

Utility Technology

Basic Need (water, roads, electricity)

A Luxury, a “nice to have” (smart phone, DVR, HD TV)

Basic Internet Service Ultra fast and/or fiber Internet Service

The “Broadband is a Utility” argument discounts the fact that adopting better broadband is a technology upgrade decision.

In 2012, to maximize broadband’s benefits and drive innovation, business, organizations and households must adopt and utilize…

E-Solutions

Ultra-fast broadband

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Technology’s Adoption Groups

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We all tend to fall somewhere on the “technology adoption curve”

“Innovators” alone will not create a sustainable network

This is the “nature part of the equation of broadband’s consumers (stay tuned for the nurture)

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“Crossing the Chasm” *

Innovators buy features, The rest of us want benefits

“Faster” is not a benefit!

* Geoffrey A. Moore, 1991

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2 Simple Steps (But Not 1)

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Education – driving understanding of the benefits of ultra-fast broadband

Close – getting the household, company, organization to actually signup

So how do we do this????

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And to the Nurture…

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Explain the technology – Distinguishing the difference and the promise of the new technology

Create a communications plan to reach target audience(s)

Reduce the time it takes to realize benefits by ratcheting up Knowledge of ROI, benefits, etc.

Use the social system (Influencers) to tout the technology’s advantages

The theory of “Diffusion of Innovations” tells us that you can NURTURE a person’s nature by doing

the following…

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Driving UtilizationTechnology is not enough

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In the Broadband Equation, the quality of each input affects the output

One Factor is not Enough

Skills AverageLagging Technology

SkillsTechnology BENEFITS

Technology No Skills Average

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16

less th

an 1 yr

1 yr up to

2 yrs

2 yrs up to

3 yrs

3 yrs up to

4 yrs

4 yrs up to

5 yrs

more th

an 5 yrs5.00

5.50

6.00

6.50

7.00

5.27

5.66

5.86

6.00

6.26

6.76

Average Broadband utilization from 0 to 10 (DEi Score) / Experience using broadband

Time using broadband

Broa

dban

d uti

lizati

on fr

om 0

to 1

0 (D

Ei s

core

)

Source: SNG Digital Economy Database n = 14,176 from NC, VA, KY and LA collected in 2010 and 2012

Experience Matters as much as Technology

Optimized broadband utilization is not inborn, but acquired

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Lack of internal expertise and knowledge

High cost of development/maintenance

Available Internet is too slow

Loss of personal contact with clients

Security concerns

Privacy concerns

0% 10% 20% 30% 40% 50%

18.4%

22.5%

23.6%

25.5%

40.3%

41.0%

Percent Establishments defining above barriers to using the Internet as “Very Im-portant”

The Biggest Barrier is Not Knowing

Source: SNG Digital Economy Database n = 12,177 from NC, VA, KY and LA collected in 2010 and 2012

Fear of the unknown overrules slow Internet as a barrier

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Adoption and Utilization Is Key How SNG Helps Drive Utilization

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We uncover Internet use at a micro-level and benchmark against peers

17 e-solutions1 by organizations30 e-solutions1 by households

Utilization data collected2 by SNG directly From 23,000 businesses / organizations And 11,000 households (a normative database).

Results shown use SNG’s Digital Economy index (DEi), a composite score between 1 and 10 to reflect level of Internet utilization.

How SNG Measures Utilization

1. Internet-enabled applications and processes; 2. Between 2008-201219

DEi scoring process enables comparisons and rankings by sector or region

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20

3 up to

4

4 up to

5

5 up to

6

6 up to

7

7 up to

8

8 up to

9

9 up to

10

0%

5%

10%

15%

20%

25%

30%

35%

40%

14.8%

20.0%

15.7%

25.5%

29.4% 30.7%

36.8%

Contribution of Internet to Revenues / Level of utilization

Level of Broadband Utilization (DEi score)

% o

f Rev

enue

s att

ribu

ted

from

Inte

rnet

usa

geIncreased Utilization Directly Correlates to Revenue Growth

Businesses underutilizing the Internet miss significant revenue opportunitiesSource: SNG Digital Economy Database n = 1,202 from NC, VA and KY collected in 2010-12

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0 up to 1 1 up to 2 2 up to 3 3 up to 4 4 up to 5 5 up to 6 6 up to 7 7 up to 8 8 up to 9 9 up to 100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

e-Solutions with greatest impact used by those with most experience & skills (i.e. highest DEi Score)

Slow / Late Adoption

Social networking

Rich media or service creation

Selling goods or services

Teleworking Deliver services and contentResearch by staff

Website for organization

Access government information

Purchasing goods and services

Electronic document transfer

Fast / Early Adoption

© Strategic Networks Group, Inc. 2012

Highest value, but requires awareness

and high quality Internet connection

The adoption process for e-solutions by businesses

DEi Score

Util

izati

on

Source: SNG Digital Economy Database n = 9,677 from NC, VA, KY and LA collected in 2010-2012

Fast / Early Adoption

Slow / Late Adoption

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5.0

5.5

6.0

6.5

7.0

7.5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Higher value e-solutions being used by fewer households

Average DEi Score Percentage of Households (%)

DEi S

core

Util

izatio

n©

Str

ateg

ic N

etw

orks

Gro

up, I

nc. 2

012

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Broadband Utilization and Household Earning Power

Biggest benefits!

Highest value, but requires awareness and high quality Internet connection

Source: SNG Digital Economy Database n = 4,638 from NC, VA, KY and LA collected in 2010

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Driving Adoption and Utilization

DEi Scorecard is delivered to each business and organization

Individualized one page report that presents: benchmarking against peers, potential ROI from increased utilization, local advisors

Data based on the individual’s current broadband utilization and industry average

Shared with local economic development agencies so they can help businesses and organizations throughout the process

Automatically created and distributed by SNG online tools

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For an individual business or organization, increasing utilization by 10% means :

Increasing revenues by 24%

Decreasing costs by 7%

Why Drive Utilization?

For a Region, it means :

Allowing businesses to be more competitive

Creating a demand for high-skilled workers

Adding fiscal revenues

Average multipliers identified by SNG from over 12,000 data records collected in 2009-10.

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Reliable, affordable BB

Responsive Customer Service

Meaningful utilization

Local ownership to drive economic development

Economic Growth and quality of life from broadband

The Elements of Success

TO ENSURE

YOU NEED

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2626

Thank-you

Let’s connect !www.sngroup.com

Michael Curri, PresidentStrategic Networks Group, Inc.

North America + 1.613.234.1549mcurri@sngroup.com

Doug Adams, VP of CommunicationsStrategic Networks Group, Inc.

North America + 1.330.933.3374dadams@sngroup.com

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Community Anchor Institutions First in line for community improvements

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introduce new products or services

Reduce time to market for products or services

Keep pace with competitors

Reduce cost of products and services

Improve coordination with suppliers

Increase revenues

Lower operating costs

Adopt new operational processes

Reach new customers and clients

Improve staff skills

Improve service to customers and clients

Use existing resources more effectively

Make day-to-day operations easier

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

35.1%

40.3%

45.4%

48.3%

53.1%

55.6%

57.5%

58.6%

61.3%

61.5%

68.5%

71.0%

74.1%

75.6%

24.6%

25.3%

16.3%

23.0%

20.5%

24.1%

21.2%

22.3%

26.5%

22.6%

22.7%

17.2%

20.1%

17.5%

Internet benefits to health organizations

Very Important Somewhat Important Not Important Not Sure Not Applicable

Internet benefits/ Pct. establishments

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Better Broadband, Healthier Citizens

Source: SNG Digital Economy Database n = 894 from NC, VA, KY and LA collected in 2010-12

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Increase teleworking

Improve coordination with suppliers

Lower operating costs

Reach new customers and clients

Adopt new operational processes

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

30.8%

46.2%

61.5%

61.5%

61.5%

50.0%

53.8%

65.4%

65.4%

65.4%

62.5%

81.3%

81.3%

81.3%

93.8%

Internet benefits to schools by speed of connection

25Mbps and more 6 to 25Mbps 1.5 to 6Mbps

Somewhat to Very important benefits / Pct. establishments

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The Impact of Better Broadband on Schools

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All businesses and organizations

Health

Libraries

Schools

0% 10% 20% 30% 40% 50% 60%

Pct. Establishments having acquired IT skills in the past 12 months

Pct. Establishments

CAIs are Early Adopters and Broadband Savvy

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Tools for Economic DevelopmentMaximize broadband impacts

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DEi Scorecard

DEi Scorecard is delivered to each business and organization

Individualized one page report that presents: benchmarking against peers, potential ROI from increased utilization, local advisors

Data based on the individual’s current broadband utilization and industry average

Shared with local economic development agencies so they can help businesses and organizations throughout the process

Automatically created and distributed by SNG online tools

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DEi Impact Calculator- customize to individual needs -

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1. Select your organization characteristics

2. Select your actual and needed e-Solutions

Source: SNG Digital Economy Database n = 26,200

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DEi Impact Calculator- choose e-strategy based on ROI -

34

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4. Details of potential revenues and cost savings

3. See your potential benefits from increased utilization

Source: SNG Digital Economy Database n = 27,200