TELECOM SERVICES IN VERTICAL MARKETS

TELECOM SERVICES IN VERTICAL MARKETS 2011-2016 MARCH 2012 PO Box 34 Mountain Lakes, New Jersey 07046 USA 973-541-9600 phone reports@insight-corp.com http://www.insight-corp.com

What follows is an excerpt from s 109-page report. For more information, please go to http://insight-corp.com/reports/vertical11.asp. Pricing Information: Hard Copy Price $ 3995 Electronic Copy Price $ 4695 Single-User Printable PDF $ 6995 6-Seat Printable PDF $ 10,000 Unlimited Corporate-Wide Distribution The contents of this study represent our analysis of the information generally available to the public or released by responsible individuals in the companies mentioned. It does not contain information provided in confidence by our clients. Since much of the information in the study is based on a variety of sources that we deem to be reliable, including subjective estimates and analyst opinion, The INSIGHT Research Corporation does not guarantee the accuracy of the contents and assumes no liability for inaccurate source materials. Copyright 2012 by The INSIGHT Research Corporation. All Rights Reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, prior to written permission of the publisher.

CHAPTER I EXECUTIVE SUMMARY 1.1 Vertical Industry Telecommunications Spending The objective of this market research report is to examine and quantify the opportunities in various vertical industries for the telecommunications service provider community. INSIGHT examines 14 vertical markets in this report, segmented according to Standard Industrial Classification (SIC) developed by the US Department of Commerce and the North American Industry Classification System (NAICS) developed by the Bureau of Labor Statistics (BLS). These 14 vertical markets represent the majority of establishments in the US. This study begins with total telecom revenues, divides them between the business and the residential markets, and then examines the driving forces in each of 14 selected vertical industry markets. The forecasts and segmentation in this report are based on data from the US Bureau of the Census, the Bureau of Labor Statistics, the Bureau of Economic Analysis (BEA), the Federal Communications Commission (FCC), and Standard & Poor s (S&P). Telecommunications products and services are, by their very nature, commodity products, since they exhibit little or no customization. Telecom providers recognize the commodity nature of their product when they market horizontally offering everything to everyone, everywhere. Horizontal marketing provides generic one-size-fits-all offerings. In contrast, vertical marketing focuses on developing solutions to user problems within specific industries. In this market analysis report our thesis is as follows: with competition eating into already anemic profit margins, solution selling by vertical industry becomes an attractive way for telecommunications vendors to differentiate and a viable way to maintain profitability and sustained growth. Four principal growth factors affect telecommunications expenditures significantly, as shown in Figure I-1. Chapter I Reproduction without permission 1

Figure I-1 Drivers of Telecom Expenditures in Vertical Markets With a stagnant economy the business opportunities for telecommunications providers in the enterprise market seem harder to find than ever before. According to the BLS, the employment picture is not sanguine. In April 2002, unemployment hit an eight-year high of 5.9 percent. The picture did not improve as the US rolled into 2003 and by June 2003 the number peaked at 6.4 percent. Although the unemployment rate improved to 5.4 percent by August of 2004, some economists insisted that the rate only improved because a significant number people dropped out of the actively looking for jobs market, which impacts the overall unemployment calculation. In December of 2004, the unemployment rate dropped to 4.9 percent. By September of 2006, the unemployment rate was 4.6 percent. For the first eight months of 2007, the unemployment rate ranged between 4.4 and 4.6 percent. In August and September of 2008, unemployment hit 6.1 percent which was nearing the peak in June 2003. In October of 2008, unemployment rose to 6.5 percent, surpassing the peak of June 2003. By October of 2009, unemployment hit 10.2 percent, its highest rate since the end of 1982 when unemployment hit 10.8 percent. Three years later, in 2011, while not accepting it, the US has become accustomed to an unemployment rate hovering around 9-10 percent with no indication that this rate will improve over the next year. Although many indicators show that the Great Recession (not to be Chapter I Reproduction without permission 2

confused with the Great Depression in the 1930s) is over, the unemployment rate is one indicator that demonstrates that the recovery will be painfully slow. The economy has experienced slow growth based on the GDP. A GDP of over four percent is needed to substantially impact the jobless rate in a positive direction. In 2008, the GDP for the year was only.4 percent. However, the third and fourth quarters were particularly dismal at -2.7 and -5.4 respectively. By the first quarter of 2009, the GDP hit a 27-year low of -6.4 which was the same number as in the first quarter of 1982 also a time of double digit unemployment. GDP for the second quarter of 2009 improved over the first quarter to -.7, but was still negative. For the third quarter of 2009, GDP increased by 2.2 percent and in the fourth quarter of 2009 GDP increased by 5.9 percent. According to the BEA, The acceleration in real GDP in the fourth quarter primarily reflected acceleration in private inventory investment, an upturn in nonresidential fixed investment, a deceleration in imports, and an acceleration in exports. In the first quarter of 2010 GDP increased by 3.7 percent, in the second quarter of 2010 GDP increased by 1.7 percent and in the third quarter of 2010, GDP increased by two percent. This news caused improvement in the stock market, but had virtually no effect on unemployment. In 2011, in the first quarter, GDP increased by.4 percent and in the second quarter, GDP increased by 1.3 percent. In the first and second quarters, real nonresidential fixed investment increased 2.1 percent and 10.3 percent respectively. Equipment and software expenditures for the first and second quarters of 2011 increased 8.7 percent and 6.2 percent, respectively. Both of these expenditures demonstrate a slow but regular increase in business expenditures. By 2003, Federal Reserve officials had cut interest rates 13 times since 2001, and cut their target for short-term interest rates in June 2003 to one percent a 45-year low. Interest rates were increased four times up to two percent in 2004, and were raised to 4.25 percent at the end of 2005. Gradual fractional percent increases were made during 2006 as a guard against inflation, hitting 5.25 percent by September of 2006 and remaining at that rate through September 2007. The Federal Reserve lowered interest rates half a percent in September of 2007 in response to the credit crunch and the sub-prime mortgage problems that had affected both domestic and international markets in 2007. By the end of October 2007, the Federal Reserve lowered interest rates another quarter of a point, bringing it down to 4.5 percent. Chapter I Reproduction without permission 3

In December 2007, the Federal Reserve lowered interest rates another quarter of a point to 4.25 percent. Then in January of 2008, the Federal Reserve cut interest rates a further three quarters of a point, lowering it to 3.5 percent. The interest rate cuts continued in 2008 bottoming out at 2 percent and the Federal Reserve had stated in early 2008 that if they made any move on interest rates at all it would be up. However, in early October of 2008, the Fed once again cut interest rates to 1.5 percent and cut them again in late October 2008 to one percent matching the low in June 2003. This spate of rate cuts made by the Federal Reserve were intended to spur spending, and to signal overseas markets that the government would continue to act to improve the US economy in the face of the sub-prime mortgage losses. In general, there is a lack of confidence in the global market because credit markets had essentially come to a halt during 2007. Because business and private investors got too complacent about risk, the amount of mortgages that were sold by banks to investment banks and then sold as mortgage-related securities to investors grew from approximately $67 billion in 1996 to $773 billion in 2006. This is one of the key reasons that there is a current lending crisis and serious concern about the health of the economy. Another key reason is the legalization of credit default swaps in 2000 which allowed investors to bet that the mortgage market would fail. Financial institutions such as Lehman Brothers failed in part due to the inability to cover these credit default swaps. In October of 2008, it was necessary for the federal government to introduce a $700 billion bailout plan for the economy so that things would not worsen. In 2009, the US witnessed its second straight year of budget deficits topping $1 trillion, and this situation did not improve for 2010. In late September of 2010, in a speech given by Ben Bernanke (Chairman of the Federal Reserve), he stated that since the Fed had dropped the interest rates to 0.25 percent and that since there is no such thing as a negative interest rate, that the Fed can no longer use interest rates as a tool to improve the economy. Thus, on practices learned from studies of the Great Depression, the Fed has been providing liquidity to markets by buying up mortgaged backed securities in order to improve the economy. This method is called quantitative easing, and in November, 2010 the Fed decided to buy up to $600 billion more in US Treasury Bonds through June 2011, at about $75 billion per month in order to further stimulate the economy. Bernanke stated that a time will come when the economy will stabilize, and the Fed will return to using interest rates to control and regulate the economy. By October 2011, the government had amassed over $2 trillion in government debt and mortgagebacked securities. In August 2011, the Fed announced that it will continue to hold Chapter I Reproduction without permission 4

short-term interest rates near zero through mid-2013 to support the faltering economy. In late September 2011, in an effort to push long-term interest rates down, the Fed announced that it would purchase $400 billion in long-term Treasury securities using proceeds from the sale of short-term government debt. In a cost estimate by the Congressional Budget Office, $634 billion of the $700 billion bailout money provided in 2008 will be recovered. However, it is estimated that the taxpayer bailouts of housing finance giants Fannie Mae and Freddie Mac could cost as much as $363 billion through 2013. With the bailout money that has already been provided, taxpayers now own 79.9 percent of the two companies. Corporate profits from the production increased $43.8 billion in the second quarter of 2009, following an increase of $59.1 billion in the first quarter of 2009. This was clearly an uptick from 2008 when corporate profits from current production decreased $60.2 billion in the second quarter of 2008, following a decrease of $17.6 billion in the first quarter of 2008. For 2009, current-production cash flow which is the internal funds available to corporations for investment increased $30.5 billion in the second quarter, in contrast to an increase of $16.2 billion in the first quarter of 2009. Corporate profits from current production for the first quarter of 2010 increased $148.4 billion and in the second quarter of 2010 increased by $47.5 billion. In comparison, corporate profits from current production for the first quarter of 2011 increased $19 billion and $61.2 billion in the second quarter of 2011. Business spending on new equipment and software rose 13 percent in the first quarter of 2006, a trend that was not sustainable though 2006. Business spending on new equipment and software dropped to a decline of -0.1 percent in the second quarter of 2006, rose to 2.9 percent in the third quarter, and then took another drop of -4.9 percent in the fourth quarter of 2006. In the first two quarters of 2007, business spending on new equipment and software had not recovered, at 0.3 percent growth in the first quarter and 4.7 percent growth in the second quarter. The last two quarters of 2007, had 3.6 percent and one percent growth. There was a cut in spending in the first two quarters of 2008, with -.6 percent drop in growth in the first quarter and -3.2 percent in the second quarter. By 2009, business spending on new equipment and software increased by 14.6 percent in the fourth quarter following a smaller increase of 4.2 percent for the third quarter compared to a 4.9 percent decrease for the second quarter. For the first two Chapter I Reproduction without permission 5

quarters of 2010 there was an impressive increase of 20.4 percent in the first quarter and 24.9 percent in the second quarter for business spending on new equipment and software. These levels had not been seen in many years. But in 2011, these rates were back down to 8.7 percent and 6.2 percent for the first and second quarters respectively. 1.2 Telecommunications and Vertical Marketing The telecommunications sector was particularly hard hit by the previous economic downturn. In July of 2002, unemployment in the telecommunications industry reached 9.1 percent much higher than the overall unemployment rate of 5.9 percent. By July of 2003, telecom unemployment eased somewhat, down to 5.1 percent, which was better than the overall unemployment rate of 6.2 percent. In December of 2004, telecom unemployment which is no longer tracked separately and is part of the Information Sector unemployment index was at 5.7 percent, higher than the overall unemployment rate of 5.1 percent. In December of 2005, overall unemployment dropped slightly to 4.9 percent while the Information Sector unemployment index improved significantly to 3.7 percent for December of 2005. By November of 2006, the Information Sector unemployment index was at 3.9 percent, maintaining a relatively low level. By October of 2007, the Information Sector unemployment index was at 3.4 percent, actually more than one point lower than the overall unemployment rate of 4.7 percent. In August of 2008, the Information Sector unemployment index was at 4.2 percent which was nearly two points lower than the overall unemployment rate of 6.1 percent. In 2009, the Information Sector unemployment index was at 8.2 which was two points lower than the overall unemployment rate. By September of 2010, the Information Sector unemployment index was at 10.8 percent which was 1.2 points higher than the overall unemployment rate. By September of 2011, this situation had improved with the Information Sector unemployment index dropping to 7.4 percent which was 1.7 percentage points lower than the overall unemployment rate of 9.1 percent. In light of the current economic uncertainty, companies are continuing to squeeze more out of what they have on hand, choosing to buy cheaper technology less frequently. This underscores the need for telecommunications carriers to abandon Chapter I Reproduction without permission 6

business models dependent on commodity offerings and move toward business models that provide services that cater to specific vertical industry needs. The mergers that swept through the industry in 1999 and 2000 blurred conventional boundaries between carriers, highlighting a general intention to market horizontally. Late 2005 and early 2006 witnessed another wave of mergers, with Sprint acquiring Nextel, SBC taking over AT&T, Verizon taking over MCI, and, in early 2006, the new AT&T acquiring BellSouth. Later in 2006, Level3 bought Broadwing for $1.4 billion in order to help the two companies better compete with such giant carriers as AT&T and Verizon. France s Alcatel acquired Lucent Technologies at the end of 2006 for $11.6 billion, creating a global telecom equipment giant that has experienced financial woes and sizeable job cuts due to slowed spending by its largest customers and price wars with its rival Ericsson. In late 2008, Verizon Wireless was given permission by the FCC to buy Alltel Corp. in a $28 billion deal creating the nation s largest wireless carrier. Verizon was required to sell assets in 22 states in order to get FCC approval. More recently, in April, 2010 Qwest accepted a takeover offer from CenturyLink. The combined entity will serve over 17 million access lines in 37 states, five million broadband customers and an extensive nationwide backbone network. At this writing, AT&T s purchase of T-Mobile has been abandoned; the attempted merger would have formed the country s largest phone company. A large but shrinking portion of 2011 service revenue (19 percent of carrier local and long distance business wireline revenue) is still attributable to voice services a commodity. Enterprise customers perceive telecom carriers as having no specialization and no locality; rather, carriers are viewed as generalists operating in national and international markets, meaning purchase decisions revolve around price alone. The benefits of vertical marketing can be immense. As competition drives down margins, solution selling into vertical markets enables real competitive differentiation and allows increasingly sustainable profit margins. Vertical marketing can open new doors, tap niche markets, and build customer loyalty. When telecom providers focus on vertical market solutions, they move away from the commodity voice sale and toward higher-margin, value-added services. The vertical approach to marketing strengthens customer loyalty by developing closer links to the customer s core business by way of customization of products (by Chapter I Reproduction without permission 7

vertical industry), services, sales reps, customer service support, documentation, and training. 1.3 Telecommunications Expenditures by Vertical Industry The term vertical market, as used throughout this study, refers to industry-specific markets as defined by the 1987 SIC system and the 1997 NAICS developed by the US Department of Commerce. INSIGHT s objective in this study is to examine and quantify opportunities in vertical markets for telecom providers. This study begins with total telecom revenues, divides them between the business and the residential markets, and then examines the driving forces in each of 14 selected vertical markets. The forecasts and segmentation in this report are based on data from the US Bureau of the Census, the BLS, the BEA, the FCC, S&P, and a private study. INSIGHT estimates that the total US telecom wireline market reached $162.9 billion in revenue at the end of 2011. INSIGHT predicts the market will increase slowly to $167.9 billion by the end of 2016, representing a negligible compound annual growth rate (CAGR) of 0.6 percent over the forecast period, as illustrated in Figure I-2. Figure I-2 Total US Telecom Wireline Market, 2011 and 2016 ($Billions) $200 $180 $Billions $160 $140 $120 $100 2011 2016 Chapter I Reproduction without permission 8

INSIGHT estimates that businesses spent $82.7 billion on wireline services in 2011. Over the forecast period, an increasing percentage of the business revenue growth will come from enhanced services, often for vertical industries, as telecom providers seek to avoid damaging price competition by positioning their services as value-added solutions rather than commodities. Four vertical industries stand out as having the leading expenditures in the telecom industry: wholesale trade; financial, insurance, and real estate services; professional business services; and communications. These four industry categories accounted for nearly 68 percent of total business telecom expenditures by the end of 2011. In fact, if these top-tier industry segments were combined with two other industry segments durable manufacturing and healthcare the combined tier would account for over 81 percent of total business telecom expenditures. Naturally, it is these industries on which INSIGHT recommends telecom providers focus their vertical marketing efforts. Figure I-3 shows the top-tier business expenditures for telecom wireline services between 2011 and 2016. Figure I-3 Top-Tier Business Expenditures for Telecom Wireline Services, 2011 and 2016 ($Billions) $100 $80 $Billions $60 $40 $20 $0 2011 2016 Top Tier All Other INSIGHT estimates that the total US telecom wireless market will reach $175.5 billion in 2011. The CAGR for the forecast period is estimated to be 8.2 percent. Thus, unlike the wireline market, the wireless market will continue to grow over the next five years, reaching $260.6 billion in 2016, as shown in Figure I-4. Chapter I Reproduction without permission 9

Figure I-4 Total US Telecom Wireless Services, 2011 and 2016 ($Billions) $300 $250 $Billions $200 $150 $100 $50 $0 2011 2016 To cite one leading indicator of this trend, in the fourth quarter of 2005, Verizon Wireless accounted for 40 percent of the company s total revenue, as compared to the fourth quarter of 2004 in which wireless revenues accounted for 35 percent of the company s total revenue. In terms of 2006 annual revenues, Verizon reported the following: Verizon Wireless contributed $38 billion to the bottom line; Verizon Telecom contributed $33.3 billion; and Verizon Business contributed $20.5 billion. For 2007, Verizon Wireless contributed $43.9 billion to the bottom line, up 15.3 percent from 2006; Verizon Telecom contributed $31.9 billion, which was a drop from 2006; and Verizon Business contributed $21.2 billion. For 2008, Verizon Wireless accounted for 51 percent of the company s total revenue at $49 billion. Verizon Telecom contributed $30 billion in 2008 and Verizon Business contributed $21 billion. For 2009, Verizon Wireless accounted for 58 percent of the company s total revenue at $62 billion, up from 35 percent of total revenue in 2004. For the first six months of 2010, as compared to the first six months of 2009, total customers for Verizon Wireless increased by 5 percent to 91.2 million and the revenue for the first six months of 2010 was up 3.9 percent compared to the same period in 2009. According to Bloomberg, for year-end 2009, Verizon's fixed-line revenue fell 3.9 percent and its fixed-line revenue to global enterprises declined 4.5 percent as compared to 2008. Similarly, AT&T's fixed-line sales declined by 5.3 percent in 2009. For 2010, AT&T wireless revenue accounted for 47 percent of its total revenue. By the third quarter of Chapter I Reproduction without permission 10

2011, AT&T posted another decline in consumer wireline connections moving down to 41.9 million connections as compared to 43.7 million connections in the third quarter of 2010, or a 4.1 percent decline. For 2010, Verizon Wireless accounted for 59.5 percent of the company s revenue at $63.4 billion. For the first nine months of 2011, Verizon reported an increase in revenues of 2.8 percent as compared with the same nine months in 2010. However, the wireless part of the business for those nine months had increased by 9.8% as compared to the same nine months in 2010. All the data suggests that wireless will continue growing faster than all other segments. Four vertical industries lead in wireless expenditure: construction; financial, insurance and real estate; professional business services; and transportation. Together, these four industries account for 46 percent of all business wireless expenditures in 2011, as reflected in Figure I-5. Figure I-5 Top-Tier Business Expenditures for Telecom Wireless Services, 2011 and 2016($Billions) $120 $100 $Billions $80 $60 $40 $20 $0 2011 2016 All Others Top Tier Chapter I Reproduction without permission 11

TELECOM SERVICES IN VERTICAL MARKETS The 2011-2016 TABLE OF CONTENTS Chapter I EXECUTIVE SUMMARY... 1 1.1 Vertical Industry Telecommunications Spending...1 1.2 Telecommunications and Vertical Marketing...6 1.3 Telecommunications Expenditures by Vertical Industry...8 Chapter II MARKET OVERVIEW... 12 2.1 Classification Systems...12 2.2 Segmentation and Performance...13 2.2.1 Wholesale Trade...14 2.2.2 Financial, Insurance, and Real Estate Services...16 2.2.3 Professional Business Services...21 2.2.4 Communications...23 2.2.5 Durable Manufacturing...26 2.2.6 Healthcare...28 2.3 The Healthcare Industry in the Spotlight...33 2.3.1 An Industry Structure Ready for Change...35 2.3.2 Carrier Opportunities...38 2.3.3 The Importance of Vertical Marketing...42 2.4 Telecommunications Industry Trends...43 2.4.1 The Mobile Enterprise...43 2.4.2 Ethernet in the Enterprise...57 2.4.3 Private Line Trends...62 2.4.4 Managed Services...67 Table of Contents Reproduction without permission i

Chapter III DRIVERS AND EXPENDITURES... 73 3.1 Drivers of Telecom Expenditures...73 3.2 Growth in Employment...73 3.2.1 Growth in Occupations...75 3.3 Size and Number of Establishments...76 The Chapter IV MARKET SEGMENT PROFILES & CARRIER DATA... 80 4.1 Carrier Opportunities...80 4.1.1 Education Purchasing Trends...80 4.1.2 Government Purchasing Trends...83 4.1.3 Healthcare Purchasing Trends...84 4.2 Carrier Expenditures...89 4.3 Carriers Ranked By Businesses...93 4.3.1 Voice Rank...93 4.3.2 Data Rank...95 Chapter V VERTICAL MARKET FORECASTS... 99 5.1 Overview...99 5.2 Methodology...100 5.3 Prognoses...100 5.3.1 US Total Wireline Market...100 5.3.2 US Business vs. Residential Wireline Markets...102 5.3.3 US Business Expenditures in Vertical Markets...103 5.3.4 US Wireline Data vs. Voice Markets...105 5.3.5 US Business Wireline Data Expenditures in Vertical Markets...107 5.3.6 Total US Wireless Market...108 5.3.7 US Business Wireless Expenditures in Vertical Markets...109 Appendix GLOSSARY... 111 Table of Contents Reproduction without permission ii

Table of Figures The Chapter I I-1 Drivers of Telecom Expenditures in Vertical Markets...2 I-2 Total US Telecom Wireline Market, 2011 and 2016 ($Billions)...8 I-3 Top-Tier Business Expenditures for Telecom Wireline Services, 2011 and 2016 ($Billions)...9 I-4 Total US Telecom Wireless Services, 2011 and 2016 ($Billions)...10 I-5 Top-Tier Business Expenditures for Telecom Wireless Services, 2011 and 2016($Billions)...11 Chapter II II-1 IT and Telecom Healthcare Market Structure...39 II-2 Healthcare Networks...41 II-3 AT&T Connect Application Participant Status as Viewed on iphone...48 II-4 iphone Dashboard Utility...53 II-5 Global Market for Enterprise Mobility Solutions, 2011-2016 ($Millions)...57 II-6 Typical Layout for a Full Circuit...64 II-7 Managed Services Gross Margins...70 Chapter III III-1 Drivers of Telecom Expenditures in Vertical Markets...73 III-2 Total US Employment, 1986-2016 (Millions)...74 III-3 Total US Business Establishments, 1992-2008 (Millions)...78 Chapter V V-1 US Business Wireline and Wireless Revenues, 2011-2016 ($Billions)...99 V-2 US Total Wireline Revenue, 2011-2016 ($Billions)...101 V-3 US Wireline Expenditures by Business vs. Residential, 2011-2016 ($Billions)...103 V-4 US Business Top-Tier vs. All Other Telecom Expenditures, 2011 and 2016 ($Billions)...105 V-5 US Business Wireline Broadband Data Revenue, 2011-2016 ($Billions)...106 V-6 US Business Wireline Data Market Share, 2011 and 2016...106 V-7 US Total Wireless Revenues, 2011-2016 ($Billions)...108 V-8 Top-Tier Business Wireless Expenditures vs. All Others, 2011 and 2016 ($Billions)...110 Table of Contents Reproduction without permission iii

Table of Tables The Chapter II II-1 Classification System Coding...12 II-2 North American Industry Classification System Divisions...13 II-3 Wholesale Trade Representative Indices...15 II-4 Financial, Insurance, and Real Estate Services Representative Indices...19 II-5 Professional Business Services Representative Indices...22 II-6 Communications Representative Indices...25 II-7 Durable Manufacturing Representative Indices...27 II-8 Healthcare Representative Indices...29 II-9 Healthcare Market Segments...34 II-10 Market Segments for Wireline and Wireless...40 II-11 Characteristics of Ethernet Service Varieties...59 II-12 Managed Services Segments...68 II-13 Managed Service Solutions by Business Size...71 Chapter III III-1 Employment by Major Occupational Groups, 2008 and 2018 Projected (Millions)...75 III-2 Sixteen Fastest Growing Occupations, 2008-2018 (Thousands)...76 III-3 Total US Business Establishments by Industry Segment, 1Q2011...77 III-4 Distribution of US Companies by Size, 2010...78 III-5 Telecom Wireline Expenditures by Vertical Market, 2011 Forecast ($Millions)...79 Chapter IV IV-1 US Government Spending on Education, 1994-2014 ($Billions)...81 IV-2 Healthcare Segment Dimensions and Trends...87 Chapter V V-1 US Total Wireline Revenue by Type of Provider, 2011-2016 ($Billions)...101 V-2 US Business Wireline Revenue by Type of Provider, 2011-2016 ($Billions)...101 V-3 US Business Telecom Wireline Expenditures by Vertical Market, 2011-2016 ($Millions)...103 Table of Contents Reproduction without permission iv

V-4 US Business Wireline Broadband Data Revenue as a Percentage of Local and Long Distance, 2011-2016 ($Billions)...104 V-5 US Total Wireline Broadband Data Expenditures by Vertical Market, 2011-2016 ($Billions)...107 V-6 US Business Wireless Revenues, 2011-2016 ($Billions)...108 The Table of Contents Reproduction without permission v