Technology Workshop: “Strategies to Help Take Your
Business to the Next Level”
at the
Illinois State Black Chamber of Commerce’s 2nd Annual
Statewide Convention
William L. Kovacs
Vice President, Environment, Technology & Regulatory Affairs
U.S. Chamber of Commerce
Friday, August 24, 2007
Hyatt Regency, Chicago, IL
10:45 a.m. – 12:00 p.m.
Why is Broadband Important?
 Telecommunications is the central nervous system of the American
economy, impacting literally every business.
 Broadband gives business an important tool to increase productivity,
reduce costs, better serve their customers, and the opportunity to
communicate with the world.
 Between 1995 and 2004, advances in telecommunications and
information technology were responsible for as much as 75% of U.S.
labor productivity gains.
1
 Broadband enables money to be moved instantly and makes selling
products anywhere in the world possible
2
How many businesses are in
the United States?
As of 2005, there were an
estimated 25.8 million
businesses in the United
States.2
How many U.S. small
businesses are there?
99.9% of all U.S. businesses
are small businesses with
fewer than 500 employees.3
How many Black-owned
businesses are there?
As of a 2002 U.S. Census
survey, there were
approximately 1.2 million
Black-owned businesses.4
3
Percentage of Firms Owned by Different Ethnic Groups
5, 6
88.00%
*
Employer Firms
3.70%
Firm Type
1.80%
81.40%
**
Nonemployer Firms
7.40%
Whites
Hispanics or Latinos
5.90%
African Americans
82.90%
All U.S. Firms
7.00%
4.99%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Percentage Owned
*Employer firms make up 25% of all businesses but account for 97% of business activity in terms of sales
or receipts
**Non-employer firms make up 75% of all businesses but only account for 3% of business activity in terms
of sales or receipts
4
Percentage of Revenue by Race for Employer and
Non-Employer Firms
Employer Firm
Revenue by Race (%)
7
Non-Employer Firm
Revenue by Race (%)
Black .08%
Hispanic 5.4%
Hispanic 2.2%
Asian 4.5%
Asian 3.6%
Native/Islander
Native/Islander
0.7%
0.03%
White 93.1%
5
White 86.4%
White
Black
Hispanic
Black 2.9%
Asian
Native/Islander
Trends In Broadband Adoption Among Ethnic Groups
8
100%
90%
80%
70%
Percentage
60%
White
50%
Black
All Adult
40%
30%
20%
10%
0%
2005
2006
2007
White
31%
42%
48%
Black
14%
31%
40%
All Adult
30%
42%
47%
Year
6
Trends In Broadband Adoption Across Community Type
9
100%
90%
80%
70%
Percentage
60%
Urban
50%
Suburban
Rural
40%
30%
20%
10%
0%
7
2005
2006
2007
Urban
31%
44%
52%
Suburban
33%
46%
49%
Rural
18%
25%
31%
Year
Broadband Usage vs. Dial-Up Usage Among Active Internet Users
10
100%
90%
80%
70%
Broadband Users
50%
Dial-Up Users
40%
June 27, 2005Supreme Court
Issues Decision in
Brand X Case11
30%
Sept. 23, 2005FCC releases order
on DSL12
20%
10%
Ju
l-0
5
O
ct
-0
5
Ja
n06
Ap
r06
Ju
l-0
6
O
ct
-0
6
Ja
n07
Ap
r07
Ju
l-0
3
O
ct
-0
3
Ja
n04
Ap
r04
Ju
l-0
4
O
ct
-0
4
Ja
n05
Ap
r05
0%
Ja
n03
Ap
r03
Percentage
60%
Month and Year
8
11, 12, 13
Broadband Subscribers
600,000,000
567 mil
Number of Broadband Subscribers in the US
Number of Broadband Subscribers Worldwide
Number of Subscribers
500,000,000
400,000,000
281.5 mil
300,000,000
263.8 mil
209.3 mil
200,000,000
298.1 mil
164.4 mil
176.3 mil
229 mil
247.1 mil
190.3 mil
111.8 mil
100,000,000
38 mil
38.2 mil
40.9 mil 43.4 mil
48.3 mil
51 mil
Q1 2006
Q2 2006
54.5 mil
57.3 mil
60.4 mil
0
Q1 2005
Q2 2005
Q3 2005
Q4 2005
Quarter Period
9
Q3 2006
Q4 2006
Q1 2007
2011
(est.)
Broadband Subscribership by Country
14
U.S.
60,400,000
56,300,000
China
Japan
26,500,000
Country
Germany
16,100,000
15,300,000
France
S. Korea
14,100,000
U.K.
14,000,000
Italy
9,350,000
Canada
8,000,000
Spain
7,200,000
0
10,000,000
20,000,000
30,000,000
40,000,000
Number of Subscribers in Millions
10
50,000,000
60,000,000
70,000,000
15
Average Broadband Speeds
Megabits Per Second
0
10
20
30
40
50
Japan
45.6
Finland
21.7
18.2
Sweden
France
17.6
8.8
Country
Netherlands
11
70
61
Korea
Portugal
8.1
Average Speed (Mbps)
Canada
7.6
Poland
7.5
Norway
7.4
Austria
7.3
Belgium
60
6.2
Iceland
6
Germany
6
United States
4.8
U.S. E-Commerce Sales
16, 17
$250,000,000,000
U.S. E-Commerce Sales
$200,000,000,000
$2
25
,00
0,0
00
,00
Sales in Dollars
0
$150,000,000,000
$1
32
$1
08
$100,000,000,000
$8
6,3
0,0
00
,00
0
,70
0,0
00
,00
0
00
,00
0,0
0
$50,000,000,000
,00
0
$0
2005
2006
2007
Year
12
2011 EST.
Quarterly U.S. E-Commerce Retail Sales as a Percent of Total Quarterly Retail Sales
18, 19
6%
7.00%
6.00%
5.00%
2.
70
%
2.
60
2.
60
%
2.
50
%
2.
40
3.00%
%
3.
20
%
3.
10
%
3.
00
%
2.
90
%
%
Percent
4.00%
2.00%
1.00%
0.00%
Q1 2005
Q2 2005
Q3 2005
Q4 2005
Q1 2006
Q2 2006
Quarter
13
Q3 2006
Q4 2006
Q1 2007
2010 EST.
Purchasing Patterns of Web Savvy Shoppers
20, 21, 22, 23
• 79% of U.S. online consumers researched products online during
the past 3 months
• 57% of U.S. online consumers purchased products online during the
same period
• 51% of U.S. online consumers are cross-channel shoppers
(research online purchase offline last 3 months)
• Consumers who research products online before buying them offline
will influence more than $500 billion of offline sales in 2007
• Over half of online consumers research online but purchase in store
• Almost $400 billion of store sales – or 16% of total retail sales – are
directly influenced by the Web as consumers research products
online and purchase them offline
• Offline sales not influenced by the Web will decrease 24% by 2012
14
Percentage of Consumers who Research Carefully Considered Major Items Online but Don't
Purchase them Online 24
General apparel/clothing
23%
Product
Clothing accessories
33%
Footwear
38%
Baby/children's products
38%
Consumer electronics
43%
Linens/home décor/ furniture
43%
Sporting goods
44%
Jewelry
44%
Phone, wireless, or Internet service
49%
Small appliances
53%
Cable or satellite TV service
63%
Major appliances
79%
Automobiles
82%
0%
10%
20%
30%
40%
Percentage of Consumers
15
50%
60%
70%
80%
90%
Percentage of Consumers who Research Urgent, Disposable Goods Online but Don't
Purchase them Online 25
Auto parts
21%
Books
21%
Event tickets
26%
Food and beverages/groceries
27%
Flowers/cards/gifts
28%
Product
Health and beauty products
31%
Music
35%
Non-prescription drugs
36%
Office supplies
41%
51%
Tools/hardware/garden supplies
Toys
53%
Video games
54%
Videos/DVDs
54%
0%
10%
20%
30%
Percentage of Consumers
16
40%
50%
60%
What Steps Should be Taken to Increase
Broadband Deployment and Usage
Among Minority Populations?
• Access (supply) — If broadband is not
available, how do we get it out there?
• Rate of Subscribership (demand) —
If broadband is available, how do we
increase the percentage of customers who
sign up for broadband service?
17
Total of Relevant Federal Telecom and
Broadband Spending for FY 2006
Major Federal Telecom
& Broadband Programs
$7.7 billion
Other Federal
Broadband Programs
$920.2 million
Total Spending
$8.6 billion
18
Major Federal Telecom and Broadband Programs 26,27,28
Program
Agency
Description
FY2006 (obligations)
Universal Service HighCost program
Universal Service
Administrative
Company
(USAC)/Federal
Communications
Commission (FCC)
The goal of this program is to ensure that
consumers in rural, insular, and other high
cost areas have access to
telecommunications and information services,
including interexchange services and
advanced telecommunications and
information services that are reasonably
comparable to those services provided in
urban areas.
$4.1 billion
Universal Service LowIncome program
USAC/FCC
This support, commonly known as Lifeline and
Link Up, provides discounts that make basic,
local telephone service affordable for more
than seven million low-income consumers.
$820.4 million
Universal Service Rural
Health Care program
USAC/FCC
This support provides reduced rates to rural
health care providers for telecommunications
and Internet services so they pay no more
than their urban counterparts for the same or
similar telecommunications services.
$40.1 million
Universal Service
Schools & Libraries
program
USAC/FCC
This support, commonly referred to as E-rate
support, provides affordable
telecommunications and Internet access
services to connect schools and libraries to
the Internet.
$1.7 billion
19
Rural Broadband Access
Loan and Loan
Guarantee Program
Rural Utilities
Service (RUS),
U.S. Department
of Agriculture
(USDA)
This Program helps facilitate the
construction, improvement, and acquisition
of facilities and equipment for broadband
service in eligible rural communities. The
Program’s goal is to ensure that rural
consumers enjoy the same quality and
range of telecommunications services that
are available in urban and suburban
communities.
$329.2 million*
Community Connect
Broadband Grant
Program
RUS, USDA
This Program is designed to provide
financial assistance to furnish broadband
service in rural, economically-challenged
communities where such service does not
currently exist.
$8.9 million
Distance Learning and
Telemedicine Program
RUS, USDA
This Program provides funding for
telecommunications, computer networks,
and related technologies to facilities that
target rural students, teachers, medical
professionals, and residents.
$39.5 million
The Traditional Infrastructure
Program and Rural
Telephone Bank
RUS, USDA
The Rural Telephone Bank is a traditional
infrastructure loan program that provides
financing of broadband and other advanced
services.
$689.8 million
Subtotal
$7.7 billion
* Available funding for loans and loan guarantees was $1.085 billion but all available funds were not awarded.
20
Other Federal Broadband Programs
29
Program
Agency
Description
FY2006
(obligations)
Public
Telecommunications
Facilities — Planning
and Construction
National Telecommunications
and Information Administration,
Dept. of Commerce
Assists in planning, acquisition, installation
and modernization of public
telecommunications facilities
$19.7 million
Grants for Public
Works and Economic
Development
Facilities
Economic Development
Administration, Dept. of
Commerce
Provides grants to economically distressed
areas for construction of public facilities
and infrastructure, including broadband
deployment and other types of
telecommunications enabling projects.
$158.1 million
Education Technology
State Grants
Office of Elementary and
Secondary Education, Dept. of
Education
Grants to State Education Agencies for
development of information technology to
improve teaching and learning in schools
$272 million
Star Schools
Office of Assistant Secretary for
Educational Research and
Improvement, Dept. of
Education
Grants to telecommunication partnerships
for telecommunications facilities and
equipment, educational and instructional
programming
$14.8 million
Ready to Teach
Office of Assistant Secretary for
Educational Research and
Improvement, Dept. of
Education
Grants to carry out a national
telecommunications-based program to
improve the teaching in core curriculum
areas.
$10.9 million
Special Education —
Technology and
Media Services for
Individuals with
Disabilities
Office of Special Education and
Rehabilitative Services, Dept. of
Education
Supports development and application of
technology and education media activities
for disabled children and adults
$3.4 million
21
Medical Library
Assistance
National Library of Medicine,
National Institutes of Health,
Department of Health and
Human Services
Provides funds to train professional
personnel; strengthen library and
information services; facilitate access to
and delivery of health science information;
plan and develop advanced information
networks; support certain kinds of
biomedical publications; and conduct
research in medical informatics and
related sciences
$65.2 million
State Library Program
Office of Library Services,
Institute of Museum and Library
Services, National Foundation
on the Arts and the Humanities
Grants to state library administrative
agencies for promotion of library services
that provide all users access to information
through State, regional, and international
electronic networks
$163.7 Million
Native American and
Native Hawaiian
Library Services
Office of Library Services,
Institute of Museum and Library
Services, National Foundation
on the Arts and the Humanities
Supports library services including
electronically linking libraries to networks
$3.6 million
Appalachian Area
Development
Appalachian Regional
Commission
Provides project grants for Appalachian
communities to support the physical
infrastructure necessary for economic
development and improved quality of life.
$62 million
Delta Area Economic
Development
Delta Regional Authority
Grants to support self-sustaining economic
development of eight states in Mississippi
Delta region.
$7.8 million
Denali Commission
Program
Denali Commission
Provides grants through a federal and
state partnership designed to provide
critical infrastructure and utilities
throughout Alaska, particularly in
distressed communities
$139 million
Subtotal
22
$920.2 million
Recommendations
• Advocate for Executive Order creating a White House Office of
Broadband Policy to coordinate the activities of the 9 federal
agencies that are managing 20 programs aimed at ensuring that
Americans have access to telecommunications and broadband.
• Work with U.S. Chamber members, local chambers of commerce,
policymakers, and all other interested groups to support existing
efforts to make broadband available all across the United States and
to increase the demand for the technology through state and local
grassroots awareness/adoption campaigns.
• Support reforming federal broadband programs to ensure that funds
are directed to unserved and underserved areas and populations.
23
Endnotes
1
Thomas W. Hazlett, Coleman Bazelon, John Rutledge, and Deborah Allen Hewitt, Sending the Right Signals: Promoting
CompetitionThrough Telecommunications Reform, Report to the U.S. Chamber of Commerce at p. xix (Sept. 22, 2004).
Available at: http://www.teleconsensus.com/portal/teleconsensus/041006telecommstudy.htm.
2
Frequently Asked Questions, Office of Advocacy, U.S. Small Business Administration. Available at:
http://www.sba.gov/advo/stats/sbfaq.pdf.
3
Id.
4
Revenues for Black-Owned Firms Near $89 Billion, Number of Businesses Up 45 Percent, U.S. Census Bureau, April
18, 2006. Available at: http://www.census.gov/Press-Release/www/releases/archives/business_ownership/006711.html.
5
Minorities in Business: A Demographic Review of Minority Business Ownership, Office of Advocacy, U.S. Small
Business Administration, April 10, 2007. Available at: http://www.sba.gov/advo/research/rs298tot.pdf.
6
A nonemployer firm is “defined as one that has no paid employees, has annual business receipts of $1,000 or more ($1
or more in the construction industries), and is subject to federal income taxes.” Nonemployers account for almost 75% of
all businesses, but only account for approximately 3% of business activity in terms of sales or receipts, according to the
U.S. Census Bureau. Source: Firm Size Data – Statistics of U.S. Businesses and Nonemployer Statistics, Office of
Advocacy, U.S. Small Business Administration (available at: http://www.sba.gov/advo/research/data.html).
7
Minorities in Business
8
John B. Horrigan and Aaron Smith, Home Broadband Adoption 2007, Pew Internet & American Life Project, June 2007.
Available at: http://www.pewinternet.org/pdfs/PIP_Broadband%202007.pdf.
9
Id.
10
Bandwidth Report (citing Nielsen//NetRatings), WebSiteOptimization.com, Jan. 2003 – June 2007. Available at:
http://www.websiteoptimization.com/bw/.
24
11
On July 27, 2005, in Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U. S. 967 (2005), the U.S.
Supreme Court confirmed that cable companies do not have to share their broadband facilities with their competitors.
Available at: http://www.supremecourtus.gov/opinions/04pdf/04-277.pdf.
12
To ensure that its rules were technology-neutral and consistent with the Brand X case, the Federal Communications
Commission issued a rule on September 23, 2005, that phone companies would no longer have to share their DSL
broadband facilities with their competitors. Available at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05150A1.pdf.
13
World Broadband Statistics, Point Topic Ltd., Q1 2005 – Q1 2007. Available at: http://pointtopic.com/home/operatorSource/reports.asp.
14
World Broadband Statistics Report – Q1 2007, Point Topic Ltd., P. 20. (June 2007). Available at: http://pointtopic.com/contentDownload/dslanalysis/world%20broadband%20statistics%20q1%202007.pdf.
15
Daniel K. Correa, Assessing Broadband in America: OECD and ITIF Broadband Rankings, Information Technology and
Innovation Foundation, April 2007. Available at: http://www.itif.org/files/BroadbandRankings.pdf
16
“E-commerce: Growth of E-Commerce,” (citing U.S. Department of Commerce data), Economist Intelligence Unit
Country Commerce Select, April 23, 2007.
17
“Internet Economy Passes New Milestone,” Agence France Presse, Jan. 14, 2007. Available at:
http://asia.news.yahoo.com/070114/afp/070114230811hightech.html
18
Quarterly Retail E-Commerce Sales: 1st Quarter 2007, U.S. Census Bureau. (May 16, 2007). Available at:
http://www.census.gov/mrts/www/data/html/07Q1.html.
19
U.S. Online Commerce Growth and Opportunity Through Shipping, JupiterResearch, LLC., p. 1. (April 19, 2006).
Available at: http://images.fedex.com/us/retail/online_commerce.pdf.
20
Comparisons Between U.S. & Europe Consumer Multi-Channel Behavior (summary of teleconference by Forrester
Research on the “State of Multichannel Shoppers in the U.S. and Europe,” iexpound.com. (June 27, 2007). Available at:
http://www.iexpound.com/2007/06/comparrisons-between-us-europe-consumer.html.
25
21
Tamara Mendelsohn, Mobile Shopping Looks to Change Retail Self-Service, Forrester Research, Inc. (June 11, 2007).
Available at: http://www.iexpound.com/2007/06/how-mobiletools-will-be-driving-multi.html.
22
Tamara Mendelsohn, The Inevitable Convergence Of Retail Channels: How POS, Commerce Platforms, And Contact
Center Applications Unite, Forrester Research, Inc. (May 17, 2007). Summary available at:
http://www.iexpound.com/2007/05/retailer-shopping-channels-continue-to.html.
23
Tamara Mendelsohn, The Web's Impact On In-Store Sales: US Cross-Channel Sales Forecast, 2006 To 2012,
Forrester Research, Inc. (May 7, 2007. Updated June 1, 2007). Summary available at:
http://www.iexpound.com/2007/05/its-rare-that-two-independant-research.html.
24
NACTAS 2006 Benchmark Survey, Forrester Research, Inc. Summary available at:
http://www.iexpound.com/2007/04/what-types-of-goods-are-more-fitting.html.
25
Id.
26
2006 Annual Report, Universal Service Administrative Company. Available at:
http://www.usac.org/_res/documents/about/pdf/usac-annual-report-2006.pdf.
27
2005–2006 Progress Report, Rural Development, U.S. Department of Agriculture. Available at:
http://www.rurdev.usda.gov/progress/2005-6-ar-v10-final3.pdf.
28
Lennard G. Kruger, Broadband Loan and Grant Programs in the USDA's Rural Utilities Service, CRS Report to
Congress, Congressional Research Service. (July 10, 2007). Available at:
http://www.nationalaglawcenter.org/assets/crs/RL33816.pdf.
29
Lennard G. Kruger and Angele A. Gilroy, Broadband Internet Access and the Digital Divide: Federal Assistance
Programs, CRS Report to Congress, Congressional Research Service. (July 30, 2007). Available at:
http://www.nationalaglawcenter.org/assets/crs/RL30719.pdf.
26