Broadband. Business. Leveraging Technology to Stimulate Economic Growth. All Rights Reserved. Copyright 2011, Connected Nation, Washington, DC
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1 Leveraging Technology to Stimulate Economic Growth MAY 2011
2 is the Engine of Economic Growth is a powerful, enabling technology that is fast becoming the engine of economic growth in America. Increasingly, businesses seeking to open or expand operations look to see not only whether a community has robust broadband access, but also whether potential workers have digital literacy skills and tools. The country s economic future depends not only upon whether robust broadband infrastructure is present but also upon whether businesses and individuals fully utilize that technology to grow and develop local economies. 2.1 Million U.S. businesses (est.) do not use broadband -connected businesses bring in approx. $200,000 more in median annual revenues To better understand these relationships, Connected Nation is studying how businesses use broadband and broadband s impact on the business landscape. In 2008, our research found that a seven percentage point increase in broadband utilization could result in an annual economic boost of $134 billion nationally, including nearly 2.4 million jobs saved or created. In this report, we present the results of a telephone survey of 9,650 business establishments in states and territories served by Connected Nation that measured business broadband adoption, examined the use of broadband technology by those businesses, and assessed the price and quality of broadband service that businesses purchase. And the results are somewhat surprising. If these percentages are applied to all businesses across the United States, that would mean that approximately 5.5 million U.S. businesses use broadband, while approximately 2.1 million American businesses still do not subscribe. 2
3 key findings of the business technology assessment Nearly 630,000 businesses in states and territories served by Connected Nation still do not use broadband technology Adoption in crucial sectors, such as the Healthcare sector, trails even further over one-third of businesses in the Healthcare industry do not subscribe to broadband Median annual revenues of broadband-connected businesses are $200,000 higher than those without broadband es across Connected Nation states/territories pay a median monthly price of $71.92 for their broadband service, and the average download speed is 6.7 Mbps Approximately 519,000 businesses in states and territories served by Connected Nation allow their employees to telework, reducing the cost of office space, as well as the number of miles that employees are forced to commute for work The Cost of for es Varies Across States Nevada businesses have the fastest average broadband download speeds, while Kansas businesses pay the least on average. es surveyed by Connected Nation pay an average of $71.92 for their broadband service, and the average monthly price ranges from $61.06 in Kansas to $83.93 per month in Puerto Rico. The average download speed among businesses that know their advertised speeds is 6.7 Mbps, ranging from 3.9 Mbps in Puerto Rico to 9.3 Mbps in Nevada. 3
4 28% of es Do Not Use Nearly three out of four businesses use broadband, although some sectors still lag behind in broadband adoption. Addressing technology adoption gaps will require a concerted effort between the public and private sector. Over the next three years, Connected Nation will be educating, engaging, and informing businesses, community anchor institutions such as schools, libraries, and healthcare centers, and community leaders about the broadband challenge facing their communities and we will help those communities devise and implement grassroots solutions to those challenges. The High Tech and Professional Financial Services sectors lead in broadband adoption, with about 334,000 businesses in the Professional Financial Services sector and 157,000 businesses in the High Tech sector using broadband. On the other extreme, the Healthcare sector reports the lowest adoption rate at 63%, or about 85,000 businesses in the Healthcare sector that do not use broadband service. Larger businesses are more likely to use broadband service than their smaller counterparts, as would be expected. If these percentages are applied to all businesses across the United States, that would mean that approximately 5.1 million American businesses subscribe to broadband, while approximately 2.1 million still do not subscribe. 4
5 es with Generate More Revenues The impact of broadband can be seen in the difference in revenues between businesses with and without broadband, the number of businesses that increase their revenues by using the Internet, and the number of businesses that empower their employees to telework. Across states and territories served by Connected Nation, businesses that subscribe to broadband report median annual revenues to be $200,000 higher than businesses that do not use broadband. In addition, businesses that subscribe to broadband and maintain a website report median annual revenues that are $400,000 higher than businesses that do not use broadband at all. 5
6 32% of Internet-connected businesses (approximately 553,000 business establishments across states and territories served by Connected Nation) report earning revenues through online sales and transactions. This includes 29,000 businesses in the Manufacturing sector, 65,000 businesses in the Wholesale, Warehouse, Transportation sector, and 165,000 businesses in the Retail and Hospitality sector. 6
7 es Use in Unique Ways es across the states and territories served by Connected Nation use technology in ways that highlight how each state s unique character has influenced its workforce. For example: Rural Nevada businesses are more likely than rural businesses in any other state or territory served by Connected Nation to allow their employees to telework. South Carolina businesses in the Agriculture, Mining, Construction, and Utilities sector are more likely to bid on contracts online than any other Connected Nation state/territory. Alaska businesses are the most active state website users, with more than one-third of Internet-connected businesses visiting Alaska state government websites several times per month. Two out of three Internet-connected Minnesota businesses in the Healthcare sector utilize the Internet to advertise their products and services. Kansas businesses are the most likely to report that they rely on fiber for their broadband service, while Puerto Rican businesses are the most likely to say they have fixed wireless broadband connections. In addition, broadband helps empower the workforce by enabling workers to telework. Across Connected Nation states and territories, 23% of businesses (approximately 519,000 businesses) allow employees to telework. 7
8 Survey Methodology Connected Nation conducted random digit dial telephone surveys of 9,650 business establishments across 12 states/territories (including Alaska, Iowa, Kansas, Michigan, Minnesota, Nevada, Ohio, Puerto Rico, South Carolina, Texas, Florida, and Tennessee) in Surveys were conducted in each of these states/territories by one of three vendors: Thoroughbred Research Group, Eastern Research, and Estudios Tecnicos. The purpose of these surveys was to set benchmarks for technology adoption and barriers to adoption; determine best practices by identifying which applications businesses use most often; and measure the average price and speed of broadband service among business establishments in each state/territory. On average, these surveys took approximately nine minutes to complete. Sample quotas were established by company size (5 brackets) and industry sector (8 sectors). Within these 40 cells, a randomly-drawn sample of businesses listed with Dun Bradstreet were contacted for the survey. Altogether, this sample included 1,761 businesses with 50+ employees, 2,138 businesses with employees, 2,864 businesses with 5-19 employees, and 2,887 businesses with 1-4 employees. In cases where the respondent s information regarding the number of employees at the establishment differed from the information provided by Dun Bradstreet, the respondent s answer was used in determining business size quotas. Connected Nation intentionally over-sampled large businesses in most states to ensure that samples were large enough to analyze and compare to smaller businesses. In addition to the size and sector quotas, the data were subsequently weighted to ensure that the sample was representative of all employer business establishments in each state/territory, with targets determined according to the 2007 United States Census Bureau s County Pattern report, the most recent data that were available at the time the survey was conducted. Weighting of the survey data and research consultation were provided by Lucidity Research LLC, located in Westminster, MD. This sample provides a margin of error of + 1.6% at the 95% confidence level for the total sample of 9,650 businesses. This sample error accounts for sample weighting, using the effective sample size. The Technology Assessments were conducted as part of the State Data and Development (SBDD) grant program, funded by the National Telecommunications and Information Administration (NTIA). The SBDD grant program was created by the Data Improvement Act (BDIA), unanimously passed by Congress in 2008 and funded by the American Recovery and Reinvestment Act (ARRA) in To learn more about Connected Nation and its programs please visit or us at info@connectednation.org. 8
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