Table of Contents. Acknowledgements Executive Summary Vision-Objectives-Target Audience Summary of Methodology...

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1 Table of Contents Acknowledgements... 4 Executive Summary... 5 Vision-Objectives-Target Audience... 6 Summary of Methodology... 6 Key Findings... 7 Solutions and Alternatives... 7 Funding Options... 8 Defining the Current Environment... 9 Methodology... 9 Findings... 9 Map 1: Erie County Broadband Cable Provider Coverage Table 1: Individual Cable Providers Upload/Download Speeds & Monthly Cost Map 2: Erie County Broadband DSL Provider Coverage Table 2: Individual DSL Providers Upload/Download Speeds & Monthly Cost Map 3: Erie County Broadband Wireless Provider Coverage Table 3: Individual Wireless Providers Upload/Download Speeds & Monthly Costs Map 4: Erie County Broadband T1 Provider Coverage Table 4: Individual T1 Providers Upload/Download Speeds & Monthly Cost Map 5: Erie County Broadband T3 Provider Coverage Table 5: Individual T3 Providers Upload/Download Speeds & Monthly Cost Identifying User Requirements Mail Surveys Methodology Business Survey Table 6: County Business Type by Survey Respondent December 2003

2 Figure 1: Type of Internet Connection Figure 2: Sales/Revenue by Connection Type Figure 3: Level of Satisfaction by Type of Connection Table 7: Current and Future Internet Uses (Businesses) Figure 4: Willingness to Pay for Broadband Services Methodology Household Survey Table 8: Household Income Level and Internet Access Figure 5: Type of Internet Connection Figure 6: Level of Satisfaction with Current Connection Figure 7: Level of Satisfaction with Dial-up modem Users Table 9: Current and Future Internet Uses (Households) Figure 8: Type of Connection Table 10: Children (by age range) with Internet Access at Home Table 11: Household Income Level for Children Without Internet Access Figure 9: Residents Interested in Faster, always on Internet Service Figure 10: Willingness to Pay for Broadband Services Focus Groups Table 12: Focus Group Summary (Residential and Business Participants) Table 13: Focus Group Summary (All Participants) Pennsylvania Business Retention and Expansion Program Table 14: Type of Business Table 15: Use of Electronic Commerce to Conduct Business Table 16: Forms of Electronic Commerce Table 17: Technology Challenges Gap Analysis Findings December 2003

3 Map 6: Erie County Broadband DSL and Cable Provider Coverage Map 7: Erie County Broadband DSL and Cable Provider Coverage & Business Parks.. 40 Map 8: Erie County Broadband DSL and Cable Provider Coverage & Businesses Best Practices In Community Broadband Network Development Best Practice Objectives for Community Broadband Networks Solutions and Alternatives Solution: Broadband Infrastruture Solution: Education Solution: Future Infrastructure Solution: Marketing Implementation and Funding Potential Funding Sources by Solution Appendix A - Maps Appendix B Sample Surveys Appendix C Focus Group Agendas Appendix D Public Funding Sources December 2003

4 Acknowledgements The preparation of this report would not have been feasible without the focus and commitment of the members of the Erie Digital Communications Taskforce. These individuals include: Janet Anderson, Erie County Government Del Birch, Business Retention Technologies, Inc. Tom Carey, Adelphia Joel Deutermann, Velocity.net/Softek, Inc. Frank DeWolf, Penn State Behrend Mike Gidlea, Technology Council of Northwest PA John Guran, Time Warner/Cablevision Vince Humes, Intermediate Unit #5 Mark Jordano, Gannon University Mark Jovanovich, GE Transportation Systems Susan Kanonczyk, Verizon Patrick Kearney, City of Erie John Keith, Time Warner Cable Kevin Kick, Time Warner Cable/Cablevision Keith Krueger, Time Warner/Cablevision Matt Miller, DES Communications Chuck Peters, Stargate, Inc. Kevin Rafferty, DES Communications Jacob A. Rouch, Erie Regional Chamber and Growth Partnership Rick Schenker, Erie County Executive Bob Spaulding, Erie Regional Chamber and Growth Partnership Laith Wardi, Business Retention Technologies, Inc. This report was financed in part through a Community Revitalization grant from the Pennsylvania Department of Community and Economic Development. 4 December 2003

5 Executive Summary As part of the Erie County Civic Coordinating Committee s goal of developing high speed Internet access throughout Erie County, the Erie Digital Communications Taskforce (Taskforce) was tasked with preparing a broadband Internet accessibility study. Broadband Internet access is one of many tools necessary and critical for businesses to compete nationally and globally. Just like sewer, water, telephones and roads, broadband access is critical now, not in the future, for businesses to function. As basic infrastructure for businesses, those communities that do not have broadband access are at a competitive disadvantage. In order to make Pennsylvania more competitive in the global marketplace, every region of the Commonwealth needs to make itself more attractive for jobs and opportunities in an ever-evolving new economy. In today s economy, technology is not just an industry cluster; instead it is an integral part of doing business, from manufacturing, to biotechnology research and development, to broad based service industries. It is quite evident that Erie County government understands this reality of economic development. As such, the County is supporting multiple tools to help with economic development including, but not limited to, broadband access. In a few short years, Erie County officials and leaders have made a profound change in developing a new infrastructure to improve the County s economic and community climate. This is demonstrated by the accomplishments over the last several years since the state of Erie County economics report titled Toward an Economic Development Strategy for Erie was released. 1 The first recommendation of the report was the establishment of a highlevel, civic coordinating council to integrate the activities of the region s principal, businessbased civic institutions, focusing its goal on implementing the recommendations of this report and other major economic development initiatives that might emerge. Erie County s Civic Coordinating Committee (C3) was created shortly after this study was finalized and has been at the forefront of developing a new framework for economic development in Erie County. Furthermore, Erie s new economic infrastructure is gaining national attention. Imagine the mayor of the City of Erie and the County executive as keynote speakers at one of the largest economic development conferences in the country. This would have been unheard of several years ago, but in September 2003, Erie Mayor Rick Filippi and Erie County Executive Rick Schenker did just that at the International Economic Development Council s annual conference in Cincinnati, Ohio. The conference marked an important coming-out party for a community that national economic development experts say is becoming an aggressive player in the game of business recruitment and retention. 2 Today, the County has developed the framework for economic development, elected officials, business leaders and educators to create a unified approach to attracting and retaining jobs. 1 The FutureWorks Company and Regional Technology Strategies, Inc. June The Erie Times-New, September 17, December 2003

6 Erie County citizens understand the implications that the economy has on their lives. In an Erie County Citizen Survey prepared by the Erie County Department of Planning, citizens were asked the following: Name what you consider the top three problems for Erie County. According to the report, the economy was clearly the number one concern of respondents. This can be summarized in three words: good paying jobs. 3 All components required to improve Erie County s economy should focus upon meeting the goal of creating good paying jobs. Broadband access is one of these critical components. Vision-Objectives-Target Audience One of the prime economic development goals of the Civic Coordinating Committee was the development of broadband/high speed Internet access throughout Erie County. To accomplish this challenge and guide the preparation of this study, the Taskforce developed the following Vision and supporting Objectives: The Erie County will be an economic development tool that provides a snapshot of broadband access within Erie County, identifies aggregate demand, and develops options to fill gaps in broadband service while being focused on the future or next generation of broadband technology. 4 Because a report without an audience will not be implemented, the Taskforce also identified the Target Audience that would assist in implementing solutions and recommendations. As such, this document will be presented to business leaders, government officials, the development community and broadband providers as partners for implementation. Summary of Methodology Delta s methodology for conducting this study included: Obtaining current Internet coverage and pricing data from providers serving Erie County in order to map existing coverage throughout the County Sending a statistically significant survey to County businesses and residents to obtain data regarding current broadband access and requirements for future broadband access in Erie County Conducting a series of focus groups with businesses, citizens, local and elected officials and educational leaders to obtain information regarding broadband Internet access throughout Erie County Holding regular status meetings with the Erie Digital Communications Taskforce to review progress and findings and gain input, suggestions and guidance 3 Erie County Department of Planning, The Erie County Citizen Survey, March Erie Digital Communication Taskforce, July December 2003

7 Key Findings The key findings of this report are summarized as follows: Five municipalities in Erie County (i.e., Elgin Borough, Greenfield Township, Mill Village Borough, Venango Township and Wattsburg Borough) do not have broadband access Key County business parks do not have an affordable broadband infrastructure plan Eighty percent of business survey respondents currently have Internet access with the most prominent connection being dial-up modem (39%) Erie County businesses are satisfied with their current Internet service Education about the benefits of broadband access and cost of broadband access are issues identified by both businesses and citizens Businesses are willing to pay less than $50.00 per month for broadband Internet access The rate of Internet access for Erie County residents exceeds regional, statewide and national access rates Erie County residents are satisfied with their current Internet connection Higher income households are more likely to have broadband connection Erie County residents are interested in faster, always on Internet service Residents are willing to pay less than $24.00 per month for broadband Internet access Solutions and Alternatives As a result of analyzing the gap analysis, the following solutions and alternatives have been developed for review, selection, prioritization and implementation: Broadband Infrastructure 1. Provide affordable broadband access to Erie County business parks 2. Provide broadband to portions of Erie County currently lacking broadband access and promote competition for broadband service 3. Subsidize the cost of broadband for small businesses 4. Team with local universities to create Community Technology Centers 7 December 2003

8 Education Improve the awareness of the benefits of broadband access for small business. Future Infrastructure Establish the research and development capacity to develop future infrastructure. Marketing Market the positive aspects of Erie County s broadband environment. Funding Options After identifying possible solutions and alternatives, State and Federal funding resources were identified to reduce costs associated with implementing the proposed solutions. 8 December 2003

9 Defining the Current Environment Methodology Delta worked with the major providers of broadband infrastructure in Erie County to identify the coverage area and cost for broadband services throughout the County. The task was accomplished through interviews, meetings, s and Taskforce meetings. The following companies provided information for this study: Findings Cable Verizon Stargate, Inc. Alltel Time Warner Cable Velocity.net / Softek, Inc. Adelphia DES Communications Cablevision Communications Cable broadband is high speed Internet service provided by a cable television company over its network. Traditional cable networks must be upgraded to allow for two-way transmission in order to provide broadband services. Three cable companies in Erie County provide broadband service. There is complete cable coverage in 12 municipalities and partial coverage in 16 municipalities, with 10 municipalities having no access to cable broadband services. The monthly cost of residential cable ranges from $25.00 to $ Furthermore, monthly business cable rates range from $69.95 to $ Cable Data Speeds: Upload 256Kbps to GigE Download 1Mbps to GigE The following map represents areas where cable broadband access is available. A larger format of this map is available in Appendix A. 9 December 2003

10 Map 1: Erie County Broadband Cable Provider Coverage However, there are limitations to the availability within the coverage area. A resident or business must be able to receive regular cable television to access cable broadband. Additionally, Time Warner Cable plans to expand its broadband services, starting December 15, 2003, to the following municipalities: Corry Township, Concord Township, Elgin Township, Union Township, Union City Township and Wayne Township. The exact location of service was not available at the time this study was prepared. The service will be available to residential customers for $44.95 per month. The price for businesses varies depending on broadband needs. The following matrix represents individual providers, upload and download speeds and cost per service. 10 December 2003

11 Service Provider Adelphia Table 1: Individual Cable Providers Upload/Download Speeds & Monthly Cost Customer Upload Speed Download Speed Monthly Cost Residential Up to 256Kbps Up to 3Mbps $ $56.95 Business Up to 256Kbps Up to 3Mbps $ $ Stargate, Inc. Time Warner Cable Residential 128Kbps 1.5Mbps 128Kbps 1.5Mbps $25.00 Business 128Kbps 1.5Mbps 128Kbps 1.5Mbps $99.00 Residential 384Kbps 2Mbps 1Mbps $44.95 Business Up to GigE Up to GigE Varies DSL Digital Subscriber Line (DSL) technology is a modem technology that uses existing twistedpair telephone lines to transport high-bandwidth data, such as multimedia and video, to service subscribers. Verizon provides the local loop, through which all current DSL capacity is provided in Erie County. Stargate and Velocity.net/Softek, Inc. are two additional providers of DSL broadband in Erie County. The companies provide these services over the Verizon network to their customers. Therefore, the ability to expand DSL coverage is contingent upon upgrading the Verizon network. There is complete DSL coverage in 12 municipalities and partial coverage in 16 municipalities, with 10 municipalities lacking DSL access. The cost of residential DSL ranges from $34.95 to $ Business DSL rates range from $39.95 to $ DSL Data Speeds: Upload 128Kbps 768Kbps Download 768Kbps 7.1Mbps The following map represents areas where DSL broadband access is available. A larger format of this map is available in Appendix A. 11 December 2003

12 Map 2: Erie County Broadband DSL Provider Coverage The DSL coverage area map was constructed using the following methodology: The DSL activated central offices (CO) were identified and confirmed with Verizon. A radius of 18,000 feet from the CO was established. Additionally, Verizon has two remote terminals that were mapped with a radius of 18,000 feet. However, there are limits and constraints within the DSL coverage area shown. A user needs to be located within 18,000 wired feet of a central office that is equipped to provide DSL. This does not always fall within a perfect 18,000 foot radius. Additionally, the copper lines servicing a location within 18,000 feet must be of high enough quality to support DSL. During data collection, several providers informed Delta that they were within the 18,000 of a central office but that the copper wires cannot support DSL. The following matrix represents individual providers, upload and download speeds and cost per service. 12 December 2003

13 Table 2: Individual DSL Providers Upload/Download Speeds & Monthly Cost Service Provider Stargate, Inc. Velocity.net / Softek Inc. Verizon Customer Upload Speed Download Speed Monthly Cost Residential 128Kbps 768Kbps 768Kbps 1.5Mbps $39.00 Business 128Kbps 768Kbps 768Kbps 1.5Mbps $99.00 Residential 128Kbps 768Kbps 768Kbps 7.1Mbps $ $79.95 Business 128Kbps 768Kbps 768Kbps 7.1Mbps $59.95 $ Residential 128Kbps 768Kbps 768Kbps 6Mbps $34.95 Business 128Kbps 768Kbps 768Kbps 6Mbps $39.95 Wireless Wireless technology uses high frequency radio waves to transfer data. Radio frequency technology enables businesses to extend or, in some instances, replace a wired network without using wires or cables. Although base stations and other equipment must be purchased and installed, labor, maintenance and wire-repair costs are greatly decreased or eliminated, thus allowing for a quicker return on investment. Wireless Internet services may be available to places that cannot receive standard wired service. 5 Wireless broadband access is available in parts of Erie County through Velocity.net/Softek, Inc. Wireless access is available in five of the 38 municipalities in Erie County. Residential and business wireless costs range from $129 to $199. DES Communications is planning to offer wireless service to the City of Erie by the end of January Wireless Data Speeds: Upload 128Kbps 1.5Mbps Download 128Kbps 1.5Mbps The following map represents areas where wireless broadband access is available. A larger format of this map is available in Appendix A. 5 Deuterman, Joel A., Business Magazine, Options for Business Internet Connectivity, August 2003, Wireless Solutions Ideal for Developing Robust Business Networks, July December 2003

14 Map 3: Erie County Broadband Wireless Provider Coverage However, there are limitations to the availability within the coverage area. A resident or business must be able to receive the wireless signal at the location to have broadband access. The following matrix represents individual providers, upload and download speeds and cost per service. Service Provider Velocity.net / Softek, Inc. Table 3: Individual Wireless Providers Upload/Download Speeds & Monthly Costs Customer Upload Speed Download Speed Monthly Cost Residential 128Kbps 1.5Kbps 128Kbps 1.5Kbps $129 - $199 Business 128Kbps 1.5Kbps 128Kbps 1.5Kbps $129 - $ December 2003

15 T1 T1 broadband access is available throughout Erie County. T1, or Trunk Level 1, is a digital transmission link with a total signaling speed of Mbps. Since its development in 1957 by AT&T's Bell Labs, it has become the building block of dedicated voice and data service in North America. T1, also known as DS-1, is part of a progression of digital transmission pipes - a hierarchy known generically as DS, or Digital Signal Level. The price of an Internet T1 is generally comprised of two components: the local loop price and the port price. The local loop is what connects a location to the carrier's POP (Point of Presence). Local T1 loops are priced according to the distance from a location to the carrier's POP and are priced differently by carriers. Although costs vary depending on location, business access ranges from $550 to $1150 per month. T1 Data Speeds: Upload 1.544Mbps Download 1.544Mbps The following map represents areas where T1 broadband access is available by provider. A larger format of this map is available in Appendix A. Map 4: Erie County Broadband T1 Provider Coverage 15 December 2003

16 The following matrix represents individual providers, upload and download speed and cost per service: Service Provider Table 4: Individual T1 Providers Upload/Download Speeds & Monthly Cost Customer Upload Speed Download Speed Monthly Cost Alltel Business 1.544Mbps 1.544Mbps $570 Stargate, Inc. Business 256Kbps 3Mbps 256Kbps 1.5Mbps $950 - $1000 Velocity.net / Softek Inc. Business 1.5Mbps 1.5Mbps $550 - $1150 Verizon Business 768Kbps 768Kbps $944 T3 Like T1 broadband access, T3 access is available throughout Erie County. A T3 line (also known as a DS-3) is an ultra high-speed connection capable of transmitting data at rates up to 45Mbps. A T3 line is typically installed as a major networking artery for large corporations and universities with high-volume network traffic. A T3 line is comprised of 28 T1 lines, each operating at total signaling rate of 1.544Mbps. A T3 connection is comprised of two monthly charges: the local loop and the port charge. The local loop charge is the cost of the circuit provided by the Local Exchange Carrier (LEC) that allows T3 access into the carrier's network. The loop charge is based on the distance from the customer's location to the edge of the carrier's network; the farther the customer is from the network, the more the loop will cost. Although costs vary depending upon location, estimated business access ranges from $1,710 to $12,000 per month. T3 Data Speeds: Upload 43.23Mpbs 45Mbps Download 43.23Mbps 45Mbps The following map represents areas where T3 broadband access is available by provider. A larger format of this map is available in Appendix A. 16 December 2003

17 Map 5: Erie County Broadband T3 Provider Coverage The following matrix represents individual providers, upload and download speed and cost per service. Service Provider Table 5: Individual T3 Providers Upload/Download Speeds & Monthly Cost Customer Upload Speed Download Speed Monthly Cost Alltel Business 43.23Mbps 43.23Mbps $1710 Stargate, Inc. Business 6Mbps 45Mbps 6Mbps 45Mbps Varies Velocity.net / Softek, Inc. Business 45Mbps 45Mbps $ $12,000 Verizon Business 3Mbps 21Mbps 3Mbps 21Mbps Varies 17 December 2003

18 Identifying User Requirements This section of the report documents existing conditions as well as future wants and recommendations of Erie County business and residential Internet and non-internet users. Data was collected via surveys and focus groups. Existing data from the Team Pennsylvania Business Calling Program was also reviewed and used to augment primary data collected for this project. Mail Surveys Purpose While information gathered from service providers can provide valuable insight into service coverage and the level of utilization, it is also crucial to understand how consumers are currently using the Internet, and their current and future needs for Internet service. In order to understand the patterns of use and needs of Erie County consumers, Delta conducted surveys of Erie County businesses and residents. Methodology Business Survey With input from the Taskforce, Delta developed a paper-based mail survey consisting of eighteen (18) questions that was mailed to random businesses throughout Erie County. A copy of the survey is included in Appendix B. According to information obtained from InfoUSA, proprietor of one of the nation's leading business databases, there are approximately 10,992 businesses in Erie County. Based upon that number, it was determined that approximately 385 responses would be required to be 95% (+/- 5%) confident that sample results could be generalized to represent all of the businesses operating in Erie County. A residential mail survey also typically generates a response rate between 3% and 5%. To ensure a response that would represent a statistically significant sample of the total business population, Delta mailed surveys to a random sample of 3,000 businesses throughout the County. The survey packets included a letter signed by the County Executive explaining the purpose of the survey, the expected outcome of the process and assurance of anonymity. A selfaddressed, stamped return envelope was also included. In addition, the County Executive issued a press release and conducted a press conference to publicize the survey and its importance to the County. Business Survey Results A total of 661 businesses responded to the survey, resulting in a 22% response rate. Considering that a typical mail survey tends to yield a response rate between 15 and 20%, the survey conducted for this study had a highly successful response rate. The reasons for the successful return rate are likely due to a combination of several factors. First, surveys were sent to businesses in an envelope with an accompanying letter from the Erie County Executive s office. It is likely that many of the survey respondents were prompted to open the survey, as it was a document received directly from the County. Secondly, the County Executive released a press statement and conducted a press conference to coincide with the 18 December 2003

19 mailing of the surveys. This is an effective method to increase survey responses. Presurvey publicity builds interest and alerts respondents that a survey is on its way. 6 Thirdly, it is also likely that the issue of broadband access is a concern to many businesses, thereby compelling them to complete and submit the survey. Eighty-nine percent of the business respondents are headquartered in Erie County. The Retail Trade or Other Services sectors yielded the greatest number of respondents, as shown in the following table. Table 6: County Business Type by Survey Respondent County Business Type by Survey Respondent Business Type Percentage Retail Trade 18.30% Other Services 17.90% Professional, Scientific & Technical Services 12.40% Health Care & Social Assistance 10.50% Manufacturing 9.80% Finance & Insurance 5.20% Construction 5.00% Wholesale Trade 4.50% Accommodation & Food Services 3.50% Real Estate, Rental & Leasing 3.50% Educational Services 3.10% Transportation & Warehousing 1.60% Arts, Entertainment & Recreation 1.30% Agriculture, Forestry, Fishing & Hunting 1.20% Information 0.70% Public Administration 0.70% Mining 0.60% Management of Companies & Enterprises 0.10% Utilities 0.10% Businesses with sales less than $250,000 per year were the most likely to respond to the survey (30%), and 90% of the survey respondents were small businesses with less than 50 employees. 6 AWP Research, Boosting Survey Response Rates, 19 December 2003

20 Nearly Half Of Erie County Businesses Use A Dial-Up Connection Eighty percent of business survey respondents currently have Internet access, with the most prominent connection being dial-up modem (39%). DSL and cable modem connections provide access to 24% and 11% of county businesses, respectively. Of the businesses with dial-up modem connection, 98% have less than 50 employees. Figure 1: Type of Internet Connection Type of Internet Connection 17% 1% Dial-Up Modem Satellite 6% 39% DSL Wireless Cable 11% 1% 24% 1% T1 No Response T3 20 December 2003

21 Businesses with annual sales of less than $250,000 per year were more likely to have a Dialup modem (42%) than those businesses with greater annual sales. While businesses with T1 and T3 tended to have greater annual sales, annual sales of cable and DSL users varied. This is demonstrated in the following figure. Figure 2: Sales/Revenue by Connection Type Sales/Revenue by Connection Type <$250,000 42% 30% 14% 12% $250,000 - $500,000 26% 11% 15% $500,000 - $999,999 13% 17% 18% 6% $1 mil - $5 mil 10% 22% 28% 9% $5.1 mil - $10 mil 6% 8% 15% 25% $10.1 mil - $15 mil 4% 12% > $15 mil 5% 3% 36% 50% Confidential 6% 8% 10% 9% 25% 0% 20% 40% 60% 80% 100% Dial-Up Modem Cable DSL T1 T3 Retail trade establishments are most likely to have no Internet access (35%), followed by businesses identified as Other Services (24%). Erie County Businesses Are Satisfied With Their Current Internet Service Fifty-two percent of County businesses are either Somewhat Satisfied or Very Satisfied with their current Internet connection. Fifty-four percent of survey respondents were interested in faster, always on Internet service. So, although businesses are satisfied with their current service, they are also interested in faster, better access. Level of satisfaction with current Internet service varies by type of connection. Businesses with broadband access are overwhelmingly satisfied with their current connection as shown in the following chart. Fifty-four percent of dial-up modem users were either Very Satisfied or Somewhat Satisfied with their current connection. This suggests that dial-up modem users may either need to be educated on the benefits of faster, always on Internet access or that dial-up modem users are not willing to pay more for broadband access. 21 December 2003

22 Figure 3: Level of Satisfaction by Type of Connection Level of Satisfaction by Type of Connection Cable 33% 42% 10% 13% Dial-up Modem 19% 35% 24% 16% 6% DSL 46% 36% 13% 3% Satellite 50% 17% 17% 17% T1 58% 31% 8% 3% T3 50% 25% 25% 0% 20% 40% 60% 80% 100% Very Satisfied Somewhat Satisfied Neutral Somewhat Dissatisfied Very Dissatisfied County businesses use the Internet primarily for communication, data collection and research, electronic commerce and procurement. Businesses identified communication, data collection and research, customer support, electronic commerce and training as future uses that would benefit from faster, always on service. Refer to the following table: Internet Use Table 7: Current and Future Internet Uses (Businesses) How does your company currently use the Internet? How would your company use the Internet if you had faster, always on service? Communication (e.g. ) 74% 34% Data Collection/Research 60% 32% Electronic Commerce 30% 16% Procurement 23% 13% Supply Chain Management 10% 6% Video Conferencing 5% 11% Voice 3% 9% Video 3% 9% Wide Area Network (WAN) 8% 4% Virtual Private Network (VPN) 8% 4% Telecommuting 8% 8% Customer Support 31% 20% Training 21% 16% Other 6% 3% 22 December 2003

23 Businesses Are Willing To Pay Less Than $50.00 Month For Broadband Internet Access Forty-four percent of survey respondents would pay less than $50.00 per month for faster, always on Internet access. Eighty-seven percent of dial-up modem users would pay less than $50.00 per month for faster, always on Internet access. Currently, most dial-up modem users are paying less than $25.00 per month for Internet access. Figure 4: Willingness to Pay for Broadband Services Willingness to Pay for Broadband Services No Response >$1,200 $1,001 - $1,200 $801 - $1,000 $601 - $800 $401 - $600 $201 - $400 $101 - $200 $75 - $100 $50 - $74 $25 - $49 <$25 0.3% 0.2% 0.6% 0.3% 0.5% 1.8% 4.4% 5.0% 8.8% 21.2% 22.7% 34.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 23 December 2003

24 Methodology Household Survey Like the business survey, with input from the Taskforce, Delta developed a survey consisting of twenty (20) questions that was mailed to random households throughout Erie County. A copy of the survey is included in Appendix B. According to Census 2000, there are 106,507 households in Erie County. Based upon that number it was determined that approximately 385 responses would be required to be 95% (+/- 5%) confident that sample results could generalized to represent the total household population in Erie County. Based upon Delta s experience, a residential mail survey also typically generates a response rate between 15% and 20%. To ensure a response that would represent a statistically significant sample of Erie County households, Delta mailed surveys to a random sample of 3,000 households throughout the County. The resident survey packets included a letter signed by the County Executive explaining the purpose of the survey, the expected outcome of the process and assurance of anonymity. A self-addressed, stamped return envelope was also included. Additionally, the County Executive issued a press release and conducted a press conference to publicize the survey and its importance to the County. Household Survey Results A total of 712 households responded to the survey for a 24% response rate. As discussed under the business survey results, the successful rate of return was most likely due to several factors, including: a letter from the County Executive, media coverage and a level of concern about broadband access in Erie County. Erie County Households Have An Internet Access Rate That Is Higher Than The Nation Seventy-three percent of Erie County households have Internet access. This is greater than the national household Internet access rate of 50.5%. 7 The rate of Internet access is increasing rapidly across the United States. Between 2000 and 2001, the rate of household Internet access increased by 9% from 41.5% to 50.5%. 8 At the individual level, 59% of adults had Internet access at home in December Similarly, Harris Interactive reports that in February 2003, 57% of adults had Internet access at home. As shown in the following table, as income levels increase, household Internet access increases. 7 U.S. Department of Commerce, Economics and Statistics Administration, National Telecommunications and Information Administration. A Nation Online: How Americans Are Expanding Their Use of the Internet. Conducted September 2001; findings released February U.S. Department of Commerce, Economics and Statistics Administration, U.S. Census Bureau, Special Studies: Home Computers and Internet Use in the United States: August P.2 Issued September The Pew Internet & American Life Project. Internet Penetration by U.S. Region. December December 2003

25 Table 8: Household Income Level and Internet Access Household Income Level and Internet Access Income Level % with Internet Access Under $15, % $15,000-$24, % $25,000-$34, % $35,000-$49, % $50,000-$74, % $75,000-$99, % $100,000-$149, % $150,000 and over 100% Dial-Up Modem Is The Most Common Type Of Residential Connection Of those households that have Internet access, the most common type of connection is dialup modem (55%). Twelve percent of households have Cable connection and 5% of households have DSL access. Figure 5: Type of Internet Connection Type of Internet Connection 26% Dial-Up DSL Cable 1% 12% 5% 55% Satellite No Response Wireless Erie County Residents Are Satisfied With Their Current Internet Connection As illustrated in the following chart, 42% of households were either Somewhat Satisfied or Very Satisfied with their current Internet connection. 25 December 2003

26 Figure 6: Level of Satisfaction with Current Connection Level of Satisfaction with Current Connection 14% 27% Very Satisfied Somewhat Satisfied Neutral 4% 12% 15% 28% Somewhat Dissatisfied Very Dissatisfied No Response Similar to businesses, 51% of households who have dial-up modem for their Internet connection are either Somewhat Satisfied or Very Satisfied with their Internet connection. Figure 7: Level of Satisfaction with Dial-up modem Users Level of Satisfaction with Dial-up Modem Users 19% 6% 16% Very Satisfied Somewhat Satisfied Neutral Somewhat Dissatisfied 24% 35% Very Dissatisfied County households use the Internet primarily for communication, information gathering and shopping. Households identified information gathering and research, communication, and shopping as future uses that would benefit from faster, always on service. Refer to the following table. 26 December 2003

27 Internet Use Table 9: Current and Future Internet Uses (Households) Current and Future Internet Uses (Households) Your current uses of the Internet How would you use the Internet if you had faster, always on services General Shopping 32% 22% Communication (e.g. ) 69% 37% Information Gathering/Research 66% 39% Auction 16% 11% Videos 5% 12% Music 19% 19% File Transfer (MP3s, etc) 10% 14% Photography 14% 16% Gaming 19% 14% Video Conferencing 1% 7% Web Cams 4% 9% Residential Security 1% 6% Work From Home 19% 19% 27 December 2003

28 Higher Income Households Are More Likely To Have Broadband Connection For residential survey respondents, the type of residential broadband connection is impacted by income level. Sixty-six percent of households with DSL connection and 69% of households with cable connection have income levels greater than $50,000 per year, compared to 46% of households that use dial-up modem. Figure 8: Type of Connection Type of Conne c tion $150, % 7.4 % 6.3 % $100,000 - $149, % 18.5% % Household Income $75,000 - $99,999 $50,000 - $74,999 $35,000 - $49,999 $25,000 - $34,999 $15,000 - $24, % 7.4 % % % 12.5% 7.4 % 13.1% 7.4 % 12.5% % 8.8 % 5.0 % 11.1% % % 15.0 % % % Under $15, % 7.4 % 1.3 % 0% 20% 40% 60% 80% 100% D ia l U p D S L C a b le S a te llite The Majority Of Children Living In Responding Households Have Internet Access The majority of responding households with children have Internet access, as shown in the following table. Table 10: Children (by age range) with Internet Access at Home Children (by age range) with Internet Access at Home Ages 1 5 Ages 6-9 Ages Ages No 16% 11% 9% 10% Yes 84% 89% 91% 90% 28 December 2003

29 While children without Internet access are generally from homes with lower household incomes, it would appear that as the children approach junior high and high school levels, Internet access is not an issue, regardless of income level. While 72% of children aged 1 to 5 years without Internet access at home are from households with income below $25,000 per year, only 34% of children aged 6 to 9 years without Internet access at home are from households with income below $25,000 per year. Table 11: Household Income Level for Children Without Internet Access Household Income Level for Children Without Internet Access Income Level Ages 1-5 Ages 6 9 Under $15,000 27% 17% $15,000 - $24,999 45% 17% $35,000 - $49,999 0% 33% $50,000 - $74,999 18% 17% $75,000 - $99,999 9% 0% $100,000 - $149,000 0% 17% Erie County Residents Are Interested In Faster, Always On Internet Service A majority of residents (54%) would be interested in faster, always on Internet service as shown in the following table. Figure 9: Residents Interested in Faster, Always On Internet Service Residents Interested in Faster, Always On Internet Service 13% 33% 54% No Yes Already Have 29 December 2003

30 All of the survey respondents who currently have a dial-up modem connection desire faster, always on Internet service. This would suggest that although residential dial-up modem users are generally satisfied with their current connection, they are familiar with and are interested in a faster Internet alternative. The majority of dial-up modem users, 86%, do not have a separate phone line in their household. Residents Are Willing To Pay Less Than $24.00 Per Month For Broadband Access Most residents (72%) would pay less than $24.00 per month for faster, always on access. Figure 10: Willingness to Pay for Broadband Services Willingness to Pay for Broadband Services >$60 $50 - $60 $40 - $49 $35 - $39 0.0% 0.0% 3.0% 3.0% $30 - $34 9.0% $25 - $ % $20 - $ % <$20 46% 0% 10% 20% 30% 40% 50% Focus Groups Purpose To augment the survey results, a series of focus groups was conducted. A focus group provides the advantage of capturing anecdotal information not easily obtainable through a survey, and it is commonly used to gain input from constituency groups about their preferences for decisions or actions. Several characteristics of focus groups distinguish it from other types of group process tools. 10 Agreement is not necessary or even desired in the focus group 10 Justice, Thomas and Jamieson, Ph.D., David W., The Facilitator s Fieldbook, pp December 2003

31 Issues discussed are limited Groups are small - usually between 6 and 12 participants Homogeneous, multiple groups are conducted Questions are pre-formulated to create the agenda These characteristics were used as a starting point for conducting the focus groups for this study. Methodology A total of six focus groups were conducted during the week of September 22, Four different types of participants attended: businesses, residents, educators and local and elected officials. Since focus groups are intended for unscripted input and comment, statistical significance is not required in selecting participants. Invitees for each type of focus group were selected as follows: Businesses recommendations from County economic development offices, list of Erie County s 50 largest employers, business survey respondents who indicated a willingness to attend a focus group Residents - residential survey respondents who indicated a willingness to attend a focus group, referral from the County Executive s office Educators a list of County educators provided by Erie County Local and Elected Officials a list of local and elected officials provided by Erie County An invitation from the County Executive was mailed to each invitee. Residential focus groups were held in the evening at locations in Corry, Erie and Fairview. The remaining focus groups were conducted at Knowledge Park, adjacent to the Penn State Behrend campus. Prior to each focus group, a general list of questions was developed to solicit input from focus group participants. This included questions to determine: what does the term broadband mean; what are current and future Internet needs and; what types of solutions are needed to improve Internet access throughout the County? Appendix C includes the specific focus group agendas. Focus Group Results A total of 54 participants attended the focus groups, with an average group size of nine individuals. The following tables summarize focus group comments. 31 December 2003

32 Research Table 12: Focus Group Summary (Residential and Business Participants) Residential Vacations, purchases, homework Telecommuting File transfer, work related activities E-commerce Education Focus Group Summary (Residential and Business Participants) Current Prioritized Uses File Transmission Heavy graphics E-commerce Business Supply Chain Communications Bids, quotes Purchasing Research Cost Willing to Pay $25 $35/month Small business - < $100/month Time Savings Less time waiting Increase Productivity Increase Internet Usage Create/Retain Jobs Providers Lack of customer service; lack of competition Cost Difference Between business and residential users Technology Advancing Faster than Community Cost Affordability Residential and small businesses Education Lack of education on broadband advantages Table 13: Focus Group Summary (All Participants) Focus Group Summary (All Participants) Advantages of Faster, always on Service Reduce Costs Fewer phone lines Reliability Obstacles/Issues Provides a Global Presence Think Differently Local Government Lack of coordination Technology Infrastructure Speed Lack of available copper, broadband infrastructure is as important as sewer and water Too slow Impeding Economic Development Access High speed access needed to create jobs Particularly in rural locations 32 December 2003

33 Competition at the local level Government needs to address the issue by forming partnerships Invest in rural locations with federal and state funding Providers should be part of the solution Look at all alternatives Educate the community through events and media coverage Include retired citizens Look at wireless and fiber solutions Implement the best not cheapest solution Tax and user fee funding Reduce costs Funds to maintain Current and Future Internet Uses Solutions Look to other communities for best practices Include those portions of Erie County below I - 90 State investment through a regional/county entity to leverage ISP investment Include all portions of Erie County Long term, phased approach Use schools as a hub Redundancy, Competition, and Reliability Provide hardware at a reduced cost Chapter 30 rewrite Property owner ability to recoup costs for infrastructure Invest in infrastructure and competition Include residential users as school infrastructure is built How focus group participants currently use the Internet was fairly consistent with responses from the business and residential surveys. Research, file transmission for small businesses and telecommuters, e-commerce, and were priorities for the majority of the focus group participants. Timesavings and increased productivity were identified as the primary advantages to faster, always on service. Faster broadband access would also allow business owners and employees to send large volumes of information to clients in a reliable manner from work or home. In addition, the business focus group participants identified that faster service would position Erie County as a global presence, attract and retain jobs and make businesses think differently about decisions (i.e., business processes), since a large barrier would be removed. Issues and Concerns Issues and concerns were consistent across each type of focus group. The most pressing concern was with broadband providers and a perceived lack of customer service and knowledge to address issues. Support and setup were perceived as inadequate, and broadband cost for residential and small businesses was considered too high. The lack of provider competition was vocalized at both the residential and business focus groups as an obstacle for improving broadband conditions. The inability to receive DSL service when within 18,000 feet of an activated Central Office due to low quality copper lines was also identified as a common issue at both residential and business focus groups. Additionally, a lack of broadband availability in more rural areas of the County was a concern, particularly to participants in the residential focus groups. Options for connection are limited to dial-up or satellite connections. In most instances, dial- 33 December 2003

34 up is not adequate for transmitting large files necessary for completing work at home such as cost estimates and responding to bid opportunities. Furthermore, satellite broadband is viewed as too expensive to implement. In several instances, small business owners in the residential focus groups had to make significant capital expenditures in T1 or satellite options to remain competitive. The advantage of choosing to live in a rural location was diminished by the resultant cost of doing business. An additional, more universal concern was the level of awareness of the issue amongst the general public. Several focus group participants expressed concerns that the public, as well as businesses, may not see the importance of always on, broadband access, prompting the question, Do citizens know what broadband is? What would they do with it and how could it help them with their businesses? Solutions and Recommendations Focus group participants were particularly vocal in suggesting solutions and implementation strategies. In fact, many of the residential and business focus group participants would serve as excellent individuals to call upon for launching implementation strategies. Several participants asked about the timeline for implementation and recommended that solutions should be identified and implemented in the near future. The following common solution and implementation objectives emerged from the focus groups: Solutions should improve Erie County s business climate and retain and create jobs Proposed solutions should be redundant from a transmission perspective, promote competition and be reliable Proposed solutions should be faster, better and cheaper Erie County should review other community models as examples Solutions should include a long-term, phased strategy, not the cheapest solution Broadband should be viewed as critical infrastructure similar to water, sewer, etc. Focus group participants understood that in rural areas, developing new infrastructure is generally cost prohibitive for providers. Therefore, they suggested that the County augment the infrastructure build-out. Focus group participants were universal in stressing that solutions should include private-public partnerships of local, county, state, and federal government leaders; providers; private industry; and education. Government should be willing to invest money in a solution and underwrite costs as necessary, but should not own and control the entire system. Approaches should be regional and potentially include other counties in northwest Pennsylvania. Providers should be given incentives to build out their infrastructure and increase their service areas. 34 December 2003

35 Ensuring an educational component for implementing solutions was discussed at the Local and Elected Officials focus group. Publicity, including events and media coverage (i.e., press events and press release), was suggested. Several focus group participants suggested specific solutions, such as implementing wireless or fiber access Countywide. Other specific suggestions included establishing user fees to have initial installers recoup costs by new users paying for the cost of the infrastructure. Establishing a revolving loan fund to pay for the costs of infrastructure improvements and equipment installation was also suggested. It was suggested that as educational infrastructure is built or upgraded, access for neighboring residents be included as well. The Education focus group agreed that the community needs universal broadband access, but it would not be able to provide assistance. Finally, several focus group participants, particularly in the Business and Local and Elected Officials focus groups, suggested that the only significant way to bring about change is for a rewrite of Chapter 30 (PUC Enforcement) of the Pennsylvania state legislature. Pennsylvania Business Retention and Expansion Program As part of the Identifying User Requirements component, Delta reviewed results obtained from the Pennsylvania Business Retention and Expansion Program (formerly the Team Pennsylvania Business Calling Program) relative to Internet access and e-commerce. The Retention and Expansion Program is a proactive, statewide business retention program that originated in Erie County in Results of business calls enable local and regional economic development officials and state leaders to have accurate and current information about Pennsylvania businesses. Results from the Retention and Expansion Program specific to Erie County provide some general insights about common Internet and e-commerce issues. Delta reviewed aggregate results from the Retention and Expansion Program for the years 2000 through As indicated by the following table, the manufacturing sector was the dominant industry type interviewed for the Retention and Expansion Program. This should not be inferred as a survey bias, but rather a reflection of manufacturing s central role in the County s economy and the fact that the Retention and Expansion Program in Erie County places a strong emphasis upon interviewing manufacturing and service oriented firms. 35 December 2003