The value of broadband comes from how it is used.
SNG has researched for more than a decade how broadband and online practices are used by businesses, households, and organizations. How end users leverage technology is what we at SNG call ‘utilization’. We have studied how broadband and online practices impact businesses and people’s lives. In working with communities, regions, and states we have also assessed the costs of missing out by not having access, or not having the capability to use the online practices needed to effectively participate in an increasingly digital world.
Why does utilization matter?
- Utilization is a direct outcome of people’s awareness and capability to leverage technology and online practices (e.g. selling or buying online, teleworking, using social media).
- Showing people why they want or need to use online practices drives demand for broadband and higher value services.
- The way people use broadband directly impacts their appreciation of its value, which further drives adoption of new technologies and online practices.
- SNG’s research shows that driving utilization to fully leverage technology (i.e. increasing digital maturity) delivers positive impacts, not only for the household or business user, but for the community overall in terms of economic impacts and quality of life benefits.
- For those investing in, or operating broadband networks, take rates and revenues are driven by the user perception of value from how they will use the services.
The Utilization Challenge
The challenge of digital transformation through broadband lies in two areas – 1) the prevalent use of low connection speeds, and 2) the underutilization of those connections.
Whether people choose low speeds, or just don’t have higher speeds available, their lack of connectivity is a problem because:
- Low take rates negatively impact a business case for providers, leaving the area to be unserved or underserved with broadband
- Low connectivity speeds hinder online access which restricts economic and civic participation in an increasingly digital world
Utilization and Digital Transformation
- 54.0% of households are underutilizing their internet connection (Digital Economy index less than 7.0)
- 49.9% of businesses are underutilizing their internet connection (Digital Economy index less than 7.0)
Low utilization is a problem because:
- Local businesses miss out on new ways of doing business and the accompanying revenue opportunities
- Local households miss out on better access to services (health, education, civic) and remote working opportunities, which negatively impacts their quality of life
- Businesses that are uncompetitive or that cannot be found online, will decline which negatively impacts the locality’s tax base and quality of life
- Service providers will not be as interested in markets where there does not appear to be enough demand
Solution – Drive Utilization
To drive utilization, which then drives the demand for connectivity, you need to personalize the ROI (return on investment) of technology and digital transformation to businesses and households. Fundamentals of marketing and sales tell us in order to do that we need to first understand:
- who they are
- what they are doing online, or should be doing online
- why they are online (benefits)
SNG research answers these questions by showing:
- which online practices and new service offerings are required now, in the future, or are perceived not to be needed
- barriers and benefits to adopting new online practices
- preferences in bridging expertise and learning gaps
Rather than just asking people what connectivity they will subscribe to, raise people’s awareness to help them understand what they could and should be doing online. This needs to be followed-up by providing training / technical assistance so they have the capability to leverage technology.
These are the foundational elements in deploying a Digital Transformation Program whose goal is to help end users better leverage technology and online practices. Technology adoption research shows that these outcomes do not happen on their own for over 80% of the population. An ongoing process to drive digital transformation is needed, for the same reason we invest in schools and training – because without these investments we cannot maintain, nor grow our economies or quality of life.
By implementing a Digital Transformation Program, more people will become aware of what they could and should be doing online, plus they will have the capabilities to do so.
Bridging utilization gaps with 54% of households and 50% of businesses to fully leverage new technologies and online applications:
- Increases business and household benefits
- Increases local economic and community benefits
- Can stop and reverse out-migration and decline of the locality
- Drives higher take rates and subscriptions to higher value services
- Grows the market for higher value services and increases provider ARPU, which grows the business case for provider investment.
We call this a Digital Transformation Program because these outcomes do not happen on their own for over 80% of people. The results can be transformative for both households and businesses. As well, the community and local economy benefit overall through increased, purposeful utilization.
For households SNG tracks 31 types of online practices and how they are used, broken down into five major categories:
- Communication, such as email, voice, web presence, online chats, etc.
- Research of information, such as health, community, travel, job search, educational material, government information, etc.
- Transactions online, from buying or selling items online to paying bills, online banking, and government services.
- Entertainment, including consuming news, movies, music, and videos online as well as gaming.
- Productivity uses such as teleworking, education and skills training, and home businesses.
For businesses, SNG tracks 17 types of online practices and how they are used. We measure the digital maturity of typical business practices that can be done, or augmented online. These online business practices broadly break down into two categories of use:
- eCommerce are those online business practices that tend to be externally facing, such as selling online, customer service, marketing, web presence, service delivery, and social media.
- eProcess are those online business practices that are more internally facing, such as purchasing, supply chain management, collaboration, employee training, and teleworking.
SNG has accumulated a growing database of utilization and related information from more than 75,000 households and businesses. SNG’s research shows that different people will use broadband and online practices to different degrees. Some will use technology to its fullest capacity while others will use it minimally for only the basics.
When better broadband is made available in a locality people will sign up. However SNG’s research shows that 50% of businesses and 54% of households underutilize the internet connection they have.
While the innovators and early adopters will subscribe to higher service packages and have high utilization, they represent only 18-25% of the market – which is not enough for a sustainable business case. The majority of commercial and residential subscribers are underutilizing their internet connections because they lack capability and have low awareness of what is possible – in other words “they don’t know what they don’t know”. This is true for both businesses and households. This represents a significant opportunity cost to the local economy and community’s quality of life through unrealized revenues, outmigration, foregone jobs, reduced tax base, etc.
Investing in Digital Transformation
SNG’s research shows that driving digital transformation creates value for households and businesses, for network providers, and for the locality overall.
Investing in a Digital Transformation Program is needed because digital maturity does not fully evolve on its own for over 80% of the population. Most people require active engagement to raise their awareness and develop their capabilities to use technology and online practices.
Driving digital transformation requires investing in marketing, community engagement, and impact tracking, nurtures the market and drives local economic growth and community benefits. Similar to investing in education where there is an educational foundation that everyone should have (i.e. K-12 schooling), there is a base level of digital ‘know-how’ everyone in the locality should have if they are going to contribute to the local economy and civic life.
Taking the education analogy a step further, we don’t ask a child what kind of education they want – we ask them what they want to be when they are older. Similarly, for the majority of households and businesses, why are they being asked what kind of subscription they want when they don’t know what they could be doing online, what kind of online presence they want to have – or should have?
Localities and providers need to cultivate the broadband market and nurture demand:
- Raising awareness with residents and businesses by showing them what they can aspire to
- Providing training and resources so they can achieve their goals
- Supporting a lifelong learning process in the locality for its economic and social vitality
Personalizing the Value of Broadband
Utilization is driven by needs. People are motivated to subscribe to a broadband service based on how they will use it. These needs vary and need to be personalized. For example, household needs include:
- Households with children who need the internet for school study and homework.
- Seniors who need telehealth service, such as home health monitoring.
- Being able to telework effectively for those who have an opportunity to work remotely.
- Operating a home business with effective access to the internet.
- Earning additional household income online.
- Staying connected with family in other locations.
Similarly, business needs can vary even though many businesses share common needs. Most businesses now recognize that they need a web presence, whether it is a website or through social media, or both. Many businesses sell their product or services online, but how they do this and to what extent depends on those products and their market. Practices such as teleworking may be appropriate for some businesses but not for others. Business benefits can be personalized in the context of financial impacts as well as competitiveness against their peers, which is the focus of SNG’s Small Business Growth Program and DEi Scorecards.
Ways to pay for a Digital Transformation Program
All of these needs as seen by some are opportunities for others to see a similar value from their own perspectives. Creating awareness and improving digital maturity is essentially an educational process that leads to greater utilization, value, and impacts. This is an ongoing effort that requires resources and funding at a local level. Some potential sources of funding include:
Annual and operational budgets
- Franchise fees (4-7% of provider’s revenues) invested into a Digital Transformation Program, rather than deposited to municipality’s general funds
- Marketing budget from provider
- Economic development budget
State and Federal grants
- Seed funding to prepare and launch Digital Transformation Programming
The payback for such investment in utilization is enhanced community vitality and economic growth, leading to greater retention and attraction of residents and businesses and strengthening of the tax base and municipal revenues.
Learn more about how to drive utilization for economic growth
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