Moving Forward at the Speed of Broadband

Transcription

1 Sponsored by: Florida Moving Forward at the Speed of Broadband Expanded Broadband: Opportunities and Benefits for Florida A study of the economic impact of broadband access and expansion. Joseph Burke, Ph. D. Assistant Professor of Economics 1 Ave Maria University

2 2 Expanded Broadband: Opportunities and Benefits for Florida Joseph Burke, Ph.D. Executive Summary Securing expanded broadband access is critical for Florida s economic future. While cable modems and DSL lines are the more traditional forms of broadband access, mobile wireless access is the fastest growing category of broadband access. Demand for mobile wireless is high in every age group. This demand is driven by the popularity of smartphones, the Apple iphone and Google Android devices, and tables such as the ipad. Mobile data traffic is projected to grow at a rapid rate, as more customers subscribe to wireless connections and subscribers use their connections more intensively. In recent years, video has become the largest category of Internet usage as more users are streaming and watching videos through their broadband connections. Broadband access, especially wireless broadband access, is rapidly becoming critical to Florida s economic infrastructure. Demand for wireless broadband access from professionals and innovators in business, technology, and medicine is large and growing. Better access can increase business efficiency by improving internal and external communications, reducing the costs of gathering information and searching for services, and reducing the costs of ordering. Broadband applications, including wireless broadband applications, are becoming integral to ordinary business operations and are already transforming the way business is done in the fields of medicine, entertainment, energy, education, agriculture, retail, and the environment. Broadband access for medical applications that reduce costs and improve outcomes will be important for maintaining Florida s attractiveness to retirees. While access is increasing at a rapid rate in Florida, many Floridians still do not have access to broadband connection. One-third of Florida households do not have a fixed Internet connection capable of 200 Kbps or more. Two-thirds of Florida households do not have a fixed broadband connection of 3 Mbps, which is the standard that the FCC judges as necessary for the typical Internet uses. 2

3 Broadband Demand and Usage In 2009, the number of wireless devices capable of transmitting over 200 kbps increased by 35%. Traffic per broadband connection increased by 31 percent in Internet video is now approximately one-quarter of all consumer Internet traffic. According to Cisco projections, business IP traffic in the United States will grow at 24% per year for the next four years. The number of mobile wireless connections in the United States increased by 11.1 million in The number of mobile wireless Internet access service subscriptions across the United States increased by 110% in % of early adopters and professionals business, technology, and medicine in the United States owned a smartphone as of December 2009 according to ChangeWave Research. 92% of the population in the United States subscribes to mobile wireless according to Morgan Stanley. 30% of cell phone users in the United States use their phones for instant messaging and 38% use their phones for web access as of May % of smartphone subscribers are the ages of 25 and 34. According to Cisco projections, mobile data traffic in the United States will grow at 92% per year for the next four years. Mobile wireless subscribers with speeds over 200 kbps more than doubled in According to Cisco data, tablets generate five times as much traffic as smartphones on average. Broadband Access in Florida The most common 3 Mbps connection is a cable modem connection. The most common 200 Kbps connection is a mobile wireless connection. The number of 3 Mbps connections in Florida jumped up from 2.6 million to 3.1 million between December 2009 and June 2010, an increase of 19%. Residential connections of 200 Kbps grew steadily from December 2005 to June The number of 200 Kbps business connections has fallen by more than 50% since the beginning of the recession in December Fixed Broadband Access One-third of Florida households do not have an fixed Internet connection capable of 200 Kbps or more Two-thirds or 65% of Florida households do not have a fixed broadband connection necessary for the typical Internet uses In some areas, mobile broadband is being substituted for fixed broadband. Mobile Wireless Access Less than one-third of Floridians have a mobile wireless device capable of 200 Kbps or more 3

4 Less than one-sixth of Floridians have a mobile wireless device capable of 200 Kbps and full Internet access Economic Impact As a whole, the information sector directly accounts for 4.2% of Florida s GDP. Florida information sector is smaller than the national average of 4.6%. There were 72,500 Floridians directly employed in telecommunications in 2009 and 176,000 across all industries in the information sector. About 1.7% of Florida s employment is in the information industry. Economic researchers estimate that a 10% increase in telecommunications access can increase gross output by 0.5%. According to economic research, one-third of economic growth can be attributed to increased telecommunications access historically. Economic research indicates that the effect of telecommunications infrastructure on growth increases as access to telecommunications increases. Economic Opportunities and Benefits Many business applications will soon require 3 Mbps broadband access. Many businesses will soon require 3 Mbps broadband access for their ordinary operations. Businesses benefit from improved telecommunications through reduced transaction costs. Broadband access reduces the costs of ordering, the costs of gathering information and searching for services, and improves internal and external communications. Broadband access is rapidly becoming more important to the ordinary operations of businesses. As this happens, broadband access will be essential for Florida businesses to remain competitive in many industries. Increased broadband access benefits consumers reducing the cost of finding information on goods, services, jobs, and educational opportunities, from enhanced health care and public safety services, and from increased entrepreneurial opportunities. Mobile wireless broadband applications will reduce costs and improve outcomes in many fields, such medicine, energy, education, agriculture and the environment, entertainment, and retail. Mobile wireless applications have the potential to improve Florida s hurricane response and relief efforts. The wireless network is an important backup to wireline connections in these disasters. Mobile wireless broadband access will be used for medical applications to provide high quality medical care and providing that access will be important for maintaining Florida s attractiveness to retirees. 4

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6 Expanded Broadband: Opportunities and Benefits for Florida Securing expanded broadband access is critical for Florida s economic future. While cable modems and DSL lines are the more traditional forms of broadband access, mobile wireless access is the fastest growing category of broadband access. Demand for mobile wireless is high in every age group. This demand is driven by the popularity of smartphones, the Apple iphone and Google Android devices, and tables such as the ipad. Mobile data traffic is projected to grow at a rapid rate, as more customers subscribe to wireless connections and subscribers use their connections more intensively. Broadband refers to telecommunications devices capable of sending or receiving large amounts of data over many frequencies. High-speed Internet access is a synonym for broadband access. There is no exact standard of fast a broadband device is, but a common standard is that a broadband device is one that can transmit at least 200 Kbps in one direction. However, while 200 Kbps is considered broadband, the FCC identifies a much higher standard of 3 Mbps as necessary to accommodate the typical uses of high quality voice, data, graphics, and video. 1 For ease of exposition, two standards are the 3 Mbps and the 200 Kbps standards, respectively. Broadband is often used synonymously with wideband and may be contrasted with narrowband, which refers to devices that can only receive relatively small amounts of data. Broadband access can be divided into wireline and wireless access. All wireline access is also fixed access, since mobile devices are wireless. Fixed wireline access includes primarily ADSL (Asymmetric Digital Subscriber Line) access over telephone lines and cable modem access through a local cable provider. Fiber-to-the-Home (FTTH) is an emerging form of wireline access through a fiber-optic cable. FTTH is widely used in Australia, 2 and Google has been experimenting with this form of access for use in the United States. Wireless access includes primarily access through a cell phone tower with the use of a cellular modem. Wireless broadband is subcategorized into fixed wireless and mobile wireless or mobile broadband. Mobile wireless can be used anywhere with cell phone coverage and are one of the fastest growing categories of demand for broadband access. Cellular modems are incorporated into cell phones, smartphones such as the Apple s iphone, computers, electronic book readers such as Amazon.com s Kindle and Barnes and Noble s Nook, tablets such as Apple s ipad, and many laptop computers. Not all cell phones have broadband access, but many of the newer models that allow users to surf the Internet do. Satellite modems are another 1 FCC Releases New Data on Internet Access Services, Local Telephone Competition Federal Communications Commission Press Release, March 21, By 2013 more than 250,000 new households are expected to be deployed by greenfield fibre estates. See Australia - Broadband - FttH Greenfield Market, Paul Budde Communication Pty Ltd., June Available on-line at: Accessed on 8/15/11. 6

7 form of wireless access the Internet, but these are typically limited to rural areas where coverage is weak or unavailable. Wireless broadband is intrinsically more limited than wireline broadband. Wireless communication is limited by the available spectrum of frequencies over which data may be transmitted. However, one fiber optic cable has a greater data capacity than the entire RF spectrum. 3 Limits to the available spectrum will become a national issue in the next few years as demand for mobile wireless access continues to grow. 4 Broadband Access Demand and Usage More devices are being connected to the Internet. From December 2008 to December 2009, the number of wireless devices capable of transmitting over 200 kbps increased by 35% from 86 million to million. Data-capable mobile handsets increased from 228 million to 257 million. 5 SMScapable mobile handsets increased from million to million. 6 Smartphones in service increased from 40.7 million in mid-2009 to 49.8 million in December Wireless-enabled laptops and aircards increased from 7.2 million to 11.9 million. 8 Broadband connections are being used more intensively. Traffic per broadband connection increased by 31 percent in 2009, from 11.4 GB to 14.9 GB of Internet traffic per month. 9 According to Cisco, The top 1 percent of broadband connections is responsible for more than 20 percent of total Internet traffic. The top 10 percent of connections is responsible for over 60 percent of broadband Internet traffic, worldwide. 10 As penetration rates of broadband access increase, usage rates should also increase, as more users begin to reflect the behavior and usage rates of the early adopters. Video is the largest category of internet usage. More users are streaming videos and more users are watching videos. Internet video is now approximately one-quarter of all consumer Internet traffic, 3 Mobile Broadband Capacity Constraints and the Need for Optimization, Rysavy Research, Feb 24, 2010, p.4. 4 See Assessing Competition in U.S. Wireless Markets: Review of the FCC s Competition Reports, Faulhaber, Hahn, and Singer, pp FCC , FCC , FCC , FCC , Cisco, Visual Networking Index: Usage, October 25, Cisco, Visual Networking Index: Usage, October 25,

8 not including the amount of video exchanged through P2P file sharing. Internet video was 22 percent at the end of 2007, and will reach 31 percent by the end of this year. 11 Voice and video communications traffic is now six times higher than data communications traffic ( , instant messaging, instant messaging file transfer). Voice and video communications traffic (such as voice over IP [VoIP] and voice and video over instant messaging) has reached 2 percent of all traffic, up from less than 1 percent last year. 12 Contrary to popular belief, none of the top 50 global web sites (by traffic volume) featured explicit adult content. This represents a shift in content compared to the composition of top global web sites two years ago. 13 Business IP traffic is projected to continue growing at a rapid rate. Cisco predicts Business IP traffic will grow at a compound annual growth rate of 24% from 2010 to They also predict business videoconferencing traffic to increase by 41% and web-based videoconferencing traffic to increase by 45% per year over that same period. 15 The number of mobile wireless connections is growing. The number of mobile wireless connections increased from million to million from 2008 to This is an increase of 11.1 million connections, or 3.97%. More consumers and businesses are accessing the Internet using a mobile wireless Internet connection. The number of mobile wireless Internet access service subscriptions increased from 26.5 million to 55.8 million from 2008 to This is an increase of 29.3 million mobile wireless Internet access service subscriptions, or 110%. According to Pew Research, wireless Internet penetration increased across all age groups between April 2009 and May Demand from early adopters and professionals in business, technology, and medicine for wireless broadband Internet access is large and growing. According to a survey conducted by ChangeWave Research, 42% of early adopters and professionals business, technology, and medicine owned a 11 Cisco, Approaching the Zettabyte Era, June 16, Cisco, Visual Networking Index: Usage, October 25, Cisco, Visual Networking Index: Usage, October 25, Cisco, Entering the Zettabyte Era, June 1, Cisco, Entering the Zettabyte Era, June 1, FCC , FCC , FCC ,

9 smartphone as of December % of early adopters and professionals business, technology, and medicine owned a smartphone as of December % of early adopters and professionals business, technology, and medicine owned a smartphone as of December Florida must expand its broadband access in order to attract and retain professionals in these important industries. Demand for mobile wireless is high in every age group. According to Morgan Stanley, average penetration is 92%, i.e. 92% of the population subscribes to mobile wireless. 22 Highest penetration is 96% among 18- to 24-year-olds. 23 Lowest penetration is 89% among persons aged 65 and over. 24 Demand for mobile data services is growing among cell phone users in every category. Instant messaging among cell phone users increased from 17% in December 2007 to 20% in April 2009 to 30% in May Web access among cell phone users increased from 19% in December 2007 to 25% in April 2009 to 38% in May among cell phone users increased from 19% in December 2007 to 25% in April 2009 to 34% in May Texting among cell phone users increased from 58% in December 2007 to 65% in April 2009 to 72% in May Demand for smartphones is more concentrated in younger age groups. Adults over age 55 comprise 25% of all mobile wireless subscribers by only 11% of smartphone subscribers. 29 The highest percentage category of Smartphone subscribers is 28% which consists of subscribers between the ages of 25 and The lowest percentage category of smartphone subscribers is 4% which consists of subscribers aged 65 and over. 31 The young will continue to use smartphones as they get older. Wireless broadband access will be critical for Florida to attract and retain these workers. Smartphone 19 FCC , FCC , FCC , FCC , p. 105, Chart FCC , p. 105, Chart FCC , p. 105, Chart FCC , p. 102, Chart FCC , p. 102, Chart FCC , p. 102, Chart FCC , p. 102, Chart FCC , FCC , FCC ,

10 penetration will continue to increase in all categories with continued adoption and through the aging of the population. Mobile data traffic will continue to grow at a rapid rate. Cisco expects mobile data traffic to grow at a compound growth rate of 92% per year between 2010 and Subscribers are using their wireless connections more intensively. Subscribers with speeds over 200 kbps more than doubled in As of 2009, more than 55 million subscribers were on 3G or 4G network. 34 Of cell phone subscribers, 38% used their phones for web access and 72% used them phones for text messaging as of May Mobile broadband-enabled laptops are creating sharp increases in mobile traffic. According to Cisco, In 2010, 3 million tablets were connected to the mobile network, and each tablet generated 5 times more traffic than the average smartphone. In 2010, mobile data traffic per tablet was 405 MB per month, compared to 79 MB per month per smartphone. 36 Broadband Access in Florida While access is increasing at a rapid rate in Florida, many Floridians still do not have access to broadband connection. One-third of Florida households do not have a fixed Internet connection capable of 200 Kbps or more. Two-thirds of Florida households do not have a fixed broadband connection necessary for the typical Internet uses. There are 9.8 million Kbps connection used by Florida residents and businesses, and of these 3.1 million are 3 Mbps connections. Demand for mobile wireless connections has surged in recent years, and mobile wireless connections are the most popular connection for accessing the Internet. However, most mobile wireless connections are under the 3 Mbps standard. The most popular connection to the Internet under the 3 Mbps standard is a cable modem connection. Business comprises about 14% of all 200 Kbps connections in Florida, close to the national average of 14.7%. Demand for 200 Kbps connections from businesses has fallen precipitously since the beginning of the recession. It is likely that many businesses now require their employees to pay for their own phones, effectively substituting residential for business connections. 32 Cisco, Cisco Visual Networking Index: Global Mobile Data Forecast Update, , February 1, FCC , FCC , FCC , Cisco, Cisco Visual Networking Index: Global Mobile Data Forecast Update, , February 1,

11 Table 1. Florida Broadband Connections, June 2010 Speed ADSL Cable Mobile Fiber Modem Wireless Other* Total thousands 3 Mbps download and 768 Kbps upload 261 2, , Kbps or more in one direction 2,006 3, , ,768 * Includes SDSL, other wireline, satellite, fixed wireless, and powerline connections Source: FCC, Internet Access Services Report, Tables 18 and 19 Table 1 shows Florida s broadband connections in Florida for the emerging standard of 3 Mbps and the older standard of 200 Kbps. The most common 3 Mbps connection is a cable modem connection, and the most common 200 Kbps connection is a mobile wireless connection. This data comes from the FCC Internet Access Service Report. The number of 3 Mbps connections in Florida jumped up from 2.6 million to 3.1 million between December 2009 and June This is a 19% increase over the six-month period. Most of this increase is due to an increase in fiber connections and mobile wireless connections. Older data is not available from the FCC, so trends in these connections cannot be represented graphically. 11

12 Graph 1. Florida Connections Capable of 200 Kbps or More by Technology, Source: FCC, Internet Access Services Report, Various Graph 1 shows the trends in connections for Florida under the 200 Kbps standard for The graph captures the recent surge in demand for mobile wireless access, which is now the most popular form of access to the Internet. The number of mobile wireless connections grew at an average growth rate of 82% from December 2008 to June While still a relatively small category, fiber connections were the second fastest growing category, averaging 6.2% per year over the same period. Data for this graph comes from the FCC Internet Access Service Report and is provided in Table A1. 12

13 Graph 2. Florida Residential and Business Connections Capable of 200 Kbps or More, Source: FCC, Internet Access Services Report, Various Graph 1 shows the trends in residential and business connections for Florida under the 200 Kbps standard from December 2005 to June Residential connections grew steadily over the whole period, and while the growth rate in residential connections slowed slightly at the beginning of the recession, it has picked up again recently with the surging popularity of mobile wireless devices, such as the iphone. By contrast, the number of 200 Kbps business connections fell by more than 50% with the onset of the recession in December 2007 and has not yet recovered. Some of the decline in business demand is attributable to layoffs and unemployment as businesses have downsized or gone out of business. Additionally, given the ubiquity of smartphones and other wireless devices, many businesses no longer issue phones to their employees and expect or require their employees to use their own phones when they are at work. With these policies, businesses effectively substitute residential connections for business connections, and as a result demand for businesses connections will likely take longer to recover. Data for this graph comes from the FCC Internet Access Service Report and is provided in Table A2. 13

14 Fixed Broadband Access Many households in Florida do not have a fixed broadband connection. This represents a tremendous opportunity for growth for fixed broadband Internet access providers. One-third of Florida households do not have a fixed Internet connection capable of 200 Kbps or more, and two-thirds do not have a fixed broadband connection that is necessary for transmitting high-quality voice, data, graphics, and video. There are 2.6 million residential fixed broadband connections for the 7.3 million households in Florida. 37 These fixed broadband connections are capable of downloading at 3 Mbps and uploading at 768 Kbps. These connections are necessary for most typical Internet uses according to the FCC. Thirty-five percent of households in Florida have a fixed broadband connection, slightly above the national average of 33%. However, 65% of Florida households still do not have a fixed broadband connection necessary for typical Internet uses. This data comes from the FCC Internet Access Services Report. Residential broadband access by state is provided in Table A4. There are 5.1 million fixed residential Internet connections capable of 200 Kbps for the 7.3 million households in Florida. 38 Seventy percent of Florida households had a fixed residential Internet connection capable of at least 200 Kbps. While these connections are often considered broadband or high-speed Internet connections, they are too slow for many high quality voice, data, graphics, and video transmissions. Although Florida s subscription rate is higher than the national average of 64%, thirty percent or one-third of Florida households still do not have fixed Internet connections capable of 200 Kbps or more. This data comes from the FCC. Residential Internet access at 200 Kbps or more by state is provided in Table A3. 37 As of June 30, As of June 30,

15 Graph 3. Florida Cable Modem and ADSL Connections Capable of 200 Kbps or More, Source: FCC, Internet Access Services Report, Jun 30, Tables 22 and 22 Graph 3 shows the total ADSL and cable modem subscribers in Florida for Cable modem and ADSL connections are the main forms of wireline broadband access. Growth in wireline broadband access has slowed significantly since the beginning of the recession in December Prior to the recession, from June 2006 to December 2007, cable modem and ADSL access in Florida grew at an annual rate of 15%. Since the recession, from December 2007 to June 2010, cable modem and ADSL access has grown at an annual rate of 4.3%. This data comes from the FCC Internet Access Services Report. The data for this graph are provided in Table A5. Graphs 2 and 3 indicate that Florida residents may have substituted cable modem access or wireless broadband access for ADSL access during the recession. This is consistent with Cisco s research that indicates mobile broadband is a substitute for fixed broadband. 39 ADSL subscribership in Florida peaked in December 2007 while cable modem subscribership has continued to increase throughout the recession. 39 Cisco, Approaching the Zettabyte Era, June 16,

16 Graph 4. Florida ADSL Connections Capable of 200 Kbps or More, Source: FCC, Internet Access Services Report, Jun 30, Table 21 Graph 4 shows ADSL connections capable of 200 Kbps or more for Florida for Subscribership peaked at 2.05 million in December Subscribership grew at an annual rate of 11.5% prior to the recession, but has since declined at a rate of 1.2%. The FCC provides data on ADSL connections. The data for this graph are provided in Table A5. 16

17 Graph 5. Florida Cable Modem Connections Capable of 200 Kbps or More, Source: FCC, Internet Access Services Report, Jun 30, Table 22 Graph 5 shows cable modem connections capable of 200 Kbps or more for Florida for About 3 million Florida residents had a cable modem connection. Subscribership has continued to grow at a rate of 8.3% throughout the recession, though slower than the rate of 18.5% prior to the recession. The FCC provides data on cable modem connections. The data for this graph are provided in Table A5. Wireless Broadband Access Mobile telephone subscribership among Floridians continues to grow, but has slowed in recent years due to the recession. Mobile wireless access among Floridians is in line with national averages, but represents a tremendous opportunity for Florida s mobile wireless Internet access providers. Less than one-third of Floridians have a mobile wireless device capable of 200 Kbps or more, and less than one-sixth of Floridians have a mobile wireless device capable with full Internet access 17

18 Graph 6. Florida Mobile Telephone Subscribership in Thousands, Source: FCC, 15th Wireless Report, Table C-2 Graph 6 shows the number of mobile telephone subscribers in Florida for the years Mobile telephone subscribership grew at an annual rate of 4.4% over the period, though it has grown slower since the beginning of the recession. Mobile telephone subscribership grew at 6.5% annually before the recession, but has fallen to 3.6% annually since it began. The data for this graph comes from FCC Wireless Reports and are provided in Table A6. Table 2. High-Speed Internet Capable Mobile Devices and Access, Florida, Dec 2009 High-Speed* Internet Capable Population, Subscribers with Full Mobile Wireless Devices in July 2009 Internet Access Service United States 307,006, ,749,000 55,842,000 Florida 18,537,969 6,140,000 3,409,000 percent of U.S. 6.04% 5.30% 6.10% * High-speed devices are capable of 200 Kbps Source: Census; FCC, 15th Wireless Report, Table C-5 18

19 Table 2 shows the number of 200 Kbps devices and full Internet access for the United States and Florida. Mobile wireless devices include cell phones, smartphones, laptops, tablets, and other devices used by both residents and businesses. These devices are not evenly distributed throughout the population, and many Floridians may use two or more devices. About 6% of the nation s population lives in Florida, so these figures are proportional to Florida s share of the national population. Floridians have slightly less likely to have mobile wireless devices than the national average, but slightly more likely than average to have a device with mobile Internet access. Data for this table comes from the FCC and the Bureau of the Census. Less than one in three Floridians has a mobile wireless device capable of high speed Internet access, and, of those devices in service, only about half have a subscription with full Internet access. This means that less than one in six Floridians has a mobile wireless device and full Internet access. Selling more mobile wireless broadband devices and more subscriptions represents an important business opportunity for Florida s mobile wireless Internet providers. Table 3. Selected Smartphone Launches for Florida Economic Areas (EA), 2009 Economic Area Subscribers Population Penetration HHI, HHI, (Est), 2009 Rate, Miami-Fort Lauderdale, FL 6,253,316 6,252, % Orlando, FL 4,146,283 4,464, % Tampa-St. Petersburg-Clearwater, FL 2,607,865 2,747, % Jacksonville, FL-GA 2,122,948 2,175, % Fort Myers-Cape Coral, FL 787, , % Tallahassee, FL-GA 758, , % Sarasota-Bradenton, FL 740, , % Pensacola, FL 690, , % Dothan, AL-FL-GA 332, , % Source: FCC, 15th Wireless Report, Table C-3 Table 3 shows selected smartphone launches for Florida Economic Areas in Subscribership is highest in the Miami-Fort Lauderdale and Pensacola economic areas, with penetration rates of 100%, and lowest in the Sarasota-Brandenton and Fort Myers-Cape Coral areas. The table also provides the Herfindahl Hirschman Index (HHI) for each economic area. The HHI is a measure of 19

20 market concentration, and the decrease in the HHI in the Tallahassee and Dothan areas indicates that these markets became less concentrated from 2008 to Data for this table comes from the FCC. Economic Impact Fig 1. Florida s Information Industries by Share of Information Contribution to GDP, 2009 Source: BEA Figure 1 shows the Florida s information industries by their contribution to the information sector s share of GDP in current dollars. As a whole, the information sector directly accounts for 4.2% of Florida s GDP. Florida information sector is smaller than the national average of 4.6%. The data for this chart comes from the Bureau of Economic Analysis and is provided in Table A7. The direct contribution of the information sector to Florida s real GDP is provided in Table A8. 20

21 Graph 7. Total Full-Time and Part-Time Employment for Telecommunications and Information Industries for Florida, Soure: BEA Graph 7 shows total full-time and part-time employment for telecommunications and information industries in Florida from 1990 to Telecommunications is included as part of the total for all information industries. Employment in telecommunications peaked at 91,000 in 2001 before dropping by 10% in There were 72,500 Floridians directly employed in telecommunications in 2009 and 176,000 across all information industries. About 1.7% of Florida s employment is in the information industry. Data for this graph comes from the Bureau of Economic Analysis and is provided on Table A9. 21

22 Graph 8. Personal Income and Earnings for Selected Telecommunications Industries for Florida, in Thousands, Source: BEA Graph 8 shows personal income and earnings for the telecommunications and total information industries in Florida from 1990 to Telecommunications is included as part of the total for all information industries. Income and earnings rose steadily in all information industries but was roughly constant in the telecommunications industry over the last 10 years. Floridan s income and earnings totaled $13.2 billion in 2009, of which $4.5 billion or 34% was in telecommunications. Information industries contributed 1.8% to Florida s total income and earnings in Data for this graph comes from the Bureau of Economic Analysis and is provided on Table A10. The state s telecommunications infrastructure is a significant contributor to Florida s Gross State Product (GSP). In their analysis of 21 OECD countries over the period , Röller and Waverman find evidence that increased investment in telecommunications infrastructure causes an increase in aggregate output. They estimate the elasticity of GDP with respect to telecommunications penetration rate to be This implies that a 10% increase in the penetration rate of telecommunications technology would increase GDP by 0.45%. Röller and Waverman attribute one- 22

23 third of the average annual GDP growth rate for OECD countries to increased investment in telecommunications infrastructure. 40 They also find that these effects are significantly higher when telecommunications infrastructure provides nearly universal service. 41 As access at 3 Mbps becomes the new standard for telecommunications, increasing Florida broadband access at that level is expected to have a similar effect on GSP. This effect could be significantly higher due to the increasing number of applications written for broadband access and the increasing reliance of business on those applications. Economic Opportunities and Benefits Broadband access, especially wireless broadband access, is rapidly becoming critical to Florida s economic infrastructure. Better access can increase business efficiency by improving internal and external communications, reducing the costs of gathering information and searching for services, and reducing the costs of ordering. Broadband applications, including wireless broadband applications, are becoming integral to ordinary business operations and are already transforming the way business is done in the fields of medicine, entertainment, energy, education, agriculture, retail, and the environment. Broadband access for medical applications that reduce costs and improve outcomes will be important for maintaining Florida s attractiveness to retirees. Broadband access of 3 Mbps is rapidly becoming essential for ordinary business. Many business applications are being written with the expectation of this level of access. Within a few years, it is likely that the majority of businesses will require this level of access for their ordinary operations and these businesses may find it difficult if not impossible to operate without this level of access. Telecommunications is an essential component of Florida s economic infrastructure. Virtually all businesses use telecommunications technology for external and internal communications. Businesses benefit from improved telecommunications through reduced transaction costs including, for example, the costs of ordering, gathering information and searching for services, improves the ability of firms to inter-communicate Röller and Waverman, p The average growth rate for OECD countries from 1971 to 1990 was 1.96%, of which they attribute 0.60% to telecommunications. 41 Röller and Waverman, p FCC, 15 th Wireless Report,

24 Consumers benefit from increased broadband access by being able to more efficiently gather information on goods, services, jobs, and educational opportunities. 43 Other indirect benefits include enhancing health care and public safety services, increased online opportunities for entrepreneurial activity. 44 There are several fields where mobile telecommunications is growing in its importance. Recently developed applications and solutions in health care, energy, environment, and education suggest significant economic opportunities and benefits and provide a glimpse of how mobile broadband access will soon be essential for business operations. 45 Mobile health care. The FCC identifies numerous benefits from mobile health care applications. Mobile health allows clinicians and patients to give and receive care anywhere at any time. Thus, patients can use health applications, monitoring devices and sensors that accompany them everywhere diabetics, for example, can receive continuous, flexible insulin delivery through realtime glucose monitoring sensors that transmit data to wearable insulin pumps. Physicians can download diagnostic data, lab results, images and drug information to handheld devices like PDAs and smartphones; today s mobile cardiovascular solutions allow a patient s heart rhythm to be monitored continuously regardless of the patient s whereabouts. 46 Mobile health care applications are of special significance for Florida because of its attractiveness for retirement. Increased broadband access will soon become necessary in order for Florida to provide health care to the highest standards and continue to attract retirees from around the country. Mobile energy applications. The FCC identifies a number of energy applications that improve the efficiency. Advanced electrical meters typically use cellular networks or private wireless broadband networks to backhaul traffic. Wireless broadband connectivity is also fundamental to a smarter transmission grid; synchrophasors (advanced sensors that help grid operators prevent system-wide blackouts) require high-speed connectivity. With the capabilities provided by mobile broadband, utility work crews will be better able to prevent and respond to service interruptions. 47 Mobile agricultural and environmental applications. Mobile broadband applications for agriculture and the environment can reduce costs and improve outcomes. Agriculture applications incorporate 43 FCC, 15 th Wireless Report, FCC, 15 th Wireless Report, FCC, 15 th Wireless Report, FCC, 15 th Wireless Report, FCC, 15 th Wireless Report,

25 satellite analysis of soils linked to per-acre seed selection software algorithms. 48 The city of Wilmington, NC, estimates that it could save as much as $100,000 per year through remote monitoring of wetland water conditions. 49 This experiment indicates significant potential for improving efficiency in environmental projects. In addition to remote monitoring, wireless access is important for coordinating environmental responses, limiting environmental damage and coordinating cleanup. Wireless broadband access is especially important to Florida because of the risk of hurricanes. Florida s wireless broadband access provides backup for fixed broadband access that may not be available in a hurricane, when communication can make the difference between life and death. Mobile educational applications. The FCC has identified many applications that are integrating wireless broadband into education. Wireless technologies and mobile applications enable learning and teaching both inside and outside the formal classroom. Existing and emerging retail technologies allow innovative approaches to teaching and learning, integrating text, moving and still images and audio, to transform a rigid information-transfer model (from book to teacher to students). Many students have mobile devices for personal use feature phones, smartphones and non-phone devices like Apple s ipod Touch and these devices can run applications and functions that support teaching and learning. Purpose-built student machines like the Intel Classmate, the One Laptop per Child project s XO and the InkMedia LC, as well as relatively inexpensive netbooks with WiFi capability, are in growing use in classrooms. New e-reading devices and tablets, from the Kindle DX, nook, Sony Reader, Apple ipad, HP Slate and Skiff, among many others, deliver to students a range of learning opportunities including e-textbooks, e-content and digital learning spaces. States and school districts are blending wireless infrastructure, capable devices and innovative content to enhance educational outcomes. 50 Mobile wireless that reduce costs and improve educational outcomes will continue to be adopted by Florida s educators. Video lectures will be delivered to students mobile wireless devices, more textbooks will be made available in electronic format, more students will do their classroom work with computer programs and submit homework and papers electronically, and more educational applications will be developed to help students grasp difficult concepts and master the material. Mobile Entertainment. Netflix is the largest video service by number of subscribers. 51 Netflix recently began shifting away from its mail subscription and now offers a streaming-only service, and 48 Andressen, Marc, Why Software Is Eating the World, Wall Street Journal, Aug 20-21, 2011, p. C2. 49 Anderson, Nate, Wilmington, NC, takes white space to swamp, ballparks Ars Technica website. Available at: arstechnica.com/tech-policy/news/2010/02/wilmington-nc-takes-white-spaces-to-swamp-ballparks. 50 FCC, 15 th Wireless Report, Andressen, Marc, Why Software Is Eating the World, Wall Street Journal, Aug 20-21, 2011, p. C2. 25

26 Amazon.com also offers streaming video services. The largest music subscription services are Apple s itunes, Spotify, and Pandora. 52 Amazon recently rearranged its website to promote ebooks over physical books. 53 [T]he fastest growing videogame company is Zygna, which delivers its games entirely online. Zygna s first-quarter revenue this year grew to $235 million, more than double revenues from a year earlier. Rovio, maker of Angry Birds, is expected to clear $100 million in revenue this year. 54 While much of this content is delivered over fixed broadband connections, the growing popularity of mobile devices means that more is being delivered wirelessly. Mobile Retail. Google is the largest direct-marketing platform. 55 Other online retailers include Groupon, Living Social, and Foursquare. 56 Groupon generated over $700 million in revenue in 2010, after being in business for only two years. 57 Sevices such as Groupon do on-line marketing for local retailers, and Florida s retailers will increasingly come to depend on these companies as these services become more popular. 52 Andressen, Marc, Why Software Is Eating the World, Wall Street Journal, Aug 20-21, 2011, p. C2. 53 Andressen, Marc, Why Software Is Eating the World, Wall Street Journal, Aug 20-21, 2011, p. C2. 54 Andressen, Marc, Why Software Is Eating the World, Wall Street Journal, Aug 20-21, 2011, p. C2. 55 Andressen, Marc, Why Software Is Eating the World, Wall Street Journal, Aug 20-21, 2011, p. C2. 56 Andressen, Marc, Why Software Is Eating the World, Wall Street Journal, Aug 20-21, 2011, p. C2. 57 Andressen, Marc, Why Software Is Eating the World, Wall Street Journal, Aug 20-21, 2011, p. C2. 26

27 References Anderson, Nate, Wilmington, NC, takes white space to swamp, ballparks Ars Technica website. Available at: Andressen, Marc, Why Software Is Eating the World, Wall Street Journal, Aug 20-21, 2011, p. C2. Australia - Broadband - FttH Greenfield Market, Paul Budde Communication Pty Ltd., June Available on-line at: May-2011+BW Accessed on 8/15/11. Cisco, Approaching the Zettabyte Era, June 16, Cisco, Entering the Zettabyte Era, June 1, Cisco, Visual Networking Index: Usage, October 25, Faulhaber, Gerald, Robert W. Hahn, and Hal J. Singer, Assessing Competition in U.S. Wireless Markets: Review of the FCC s Competition Reports, Research Paper. FCC, 14 th Mobile Wireless Competition Report. Available at: job=cmrs_reports. FCC, 15 th Mobile Wireless Competition Report. Available at: job=cmrs_reports. FCC, Internet Access Services, various reports. Available at: comp.html. Röller, Lars-Hendrik and Leonard Waverman, Telecommunications Infrastructure and Economic Development: A Simultaneous Approach, American Economic Review, 91(4), Sep. 2001, pp Rysavy Research, Mobile Broadband Capacity Constraints and the Need for Optimization, Research Paper, Feb 24, Available at: _02_Rysavy_Mobile_Broadband_Capacity_Constraints.pdf. 27

28 Table A1. Florida Connections Capable of 200 Kbps or more As of ADSL Cable Mobile Fiber Modem Wireless Other Total thousands 6/30/2010 2,006 3, , ,768 12/31/2009 1,988 3, , ,600 6/30/2009 1,962 2, , ,368 12/31/2008 2,005 2, , ,729 6/30/2008 2,045 2, /31/2007 2,046 2, /30/2007 1,960 2,344 12/31/2006 1,873 2, /30/2006 1,723 1, /31/2005 1,509 1, /30/2005 1,285 1, /31/2004 1,111 1,384 6/30/ ,172 12/31/ ,050 6/30/ Source: FCC, Internet Access Services Report, Various Table A2. Florida Business and Residential Connections Capable of 200 Kbps or more, Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun thousands Residential 2,997 3,509 4,029 4,548 5,097 5,425 5,684 6,147 7,027 8,402 Business ,317 1,801 2,318 2,732 1,045 1,221 1,572 1,366 Total 3,515 4,408 5,346 6,349 7,416 8,157 6,729 7,368 8,599 9,768 Source: FCC, Internet Access Services Report, Various 28

29 Table A3. Residential Fixed Connections Capable of 200 Kbps or more by State, June 30, 2010 State Connections Households Subscribership Ratio thousands thousands Alabama 980 1, Alaska American Samoa * 9 * Arizona 1,566 2, Arkansas 549 1, California 8,798 12, Colorado 1,361 1, Connecticut 1,024 1, Delaware District of Columbia Florida 5,106 7, Georgia 2,095 3, Guam * 39 * Hawaii * 436 * Idaho Illinois 3,040 4, Indiana 1,446 2, Iowa 740 1, Kansas 696 1, Kentucky 943 1, Louisiana 948 1, Maine Maryland 1,542 2, Massachusetts 1,962 2, Michigan 2,281 3, Minnesota 1,321 2, Mississippi 478 1, Missouri 1,357 2, Montana Nebraska Nevada 616 1, New Hampshire New Jersey 2,501 3, New Mexico New York 5,201 7, North Carolina 2,395 3, Source: FCC, Internet Access Services Report, Jun 30, Table 16 29

30 Table A3. Residential Fixed Connections by State Capable of 200 Kbps or more, June 30, 2010 (continued) State Connections Households Subscribership Ratio thousands thousands North Dakota Northern Mariana Isl * 14 * Ohio 2,877 4, Oklahoma 764 1, Oregon 964 1, Pennsylvania 3,328 4, Puerto Rico 471 1, Rhode Island South Carolina 1,030 1, South Dakota Tennessee 1,336 2, Texas 5,309 8, Utah Vermont Virgin Islands Virginia 1,985 3, Washington 1,748 2, West Virginia Wisconsin 1,400 2, Wyoming Total 75, , Source: FCC, Internet Access Services Report, Jun 30, Table 16 30

31 Table A4. Residential Fixed Broadband* Connections by State, June 30, 2010 * Broadband connections download at 3 Mbps and upload at 768 Kbps or more State Connections Households Subscribership Ratio thousands thousands Alabama Alaska * 252 * American Samoa Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Guam * 39 * Hawaii * 436 * Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina Source: FCC, Internet Access Services Report, Jun 30, Table 15 31

32 Table A4. Residential Fixed Broadband* Connections by State, June 30, 2010 (continued) * Broadband connections download at 3 Mbps and upload at 768 Kbps or more State Connections Households Subscribership Ratio thousands thousands North Dakota Northern Mariana Isl * 14 * Ohio Oklahoma Oregon Pennsylvania Puerto Rico * 1262 * Rhode Island * 410 * South Carolina South Dakota Tennessee Texas Utah Vermont Virgin Islands Virginia Washington West Virginia Wisconsin Wyoming Total Source: FCC, Internet Access Services Report, Jun 30, Table 15 32