Days of Our Broadband Dennis Weller Chief Economist Verizon Progress and Freedom Foundation Center for Public Integrity 28 June 2007

Page 2 Where Did the Hand-Wringing Start? The OECD’s October 2006 Broadband Statistics rank the US as 15 th in penetration per 100 inhabitants

Page 3 Household Internet Adoption Percentage of Households Taking Broadband US Average: 42% EU Average: 23% NVNJDKCACTDEAZMAUTFLWAGANHNYSEMDVACOIDWYTXOHILNEORNDNCMOPANMWIRISCLAMIMNSDTNIAALAROKMEINMTKYVTMSWVUKNLKSFIBEFREEMTLUATSIDEESLVPLPTITHUCZLTCYIESKEL US States & EU Member Countries Data from household surveys taken in late 2005 and early Sources: European Commission, “E-Communications Household Survey,” July 2006; US average from Pew Internet & American Life Project, “Home Broadband Adoption 2006”, May 28, 2006; US states from Render Vanderslice & Associates, September 2006

Page 4 Examining the Data to Understand the Markets Sorting out Business – How many desktops? – OECD does not count connections over office LANS and leased lines – How does technology choice differ in different markets? – What is effect of composition of business? By size or industry segment Sorting out Geography – Density, concentration – Composition – comparing large units with small ones Sorting out Demographics – Household size – Age, income Sorting out Wireless * Ovum, Mobile Market Trends, , at 15.

Cap-Ex of US Companies and OECD Telecoms Source: Yahoo Finance data Year Ending Sept./Dec. Page 5

Page 6 Broadband Speed – the Limits of Copper Customers in the US live farther from central offices. So average loop lengths (the distance that a signal must travel over a copper line from office to customer) are longer here than in many other countries. In Italy, 80% of customers are within 2km – In the US, only 20%. Short (and conditioned) loops can permit higher speeds over the legacy infrastructure. DSL performance is highly dependent on distance. DSL speeds drop dramatically as loop length increases. Countries with short loops have made near-term progress with DSL, but will soon reach the limits of DSL technology. Page 6

Page 7 Extending Broadband Availability How can we do better in getting broadband where it isn’t? Data gathering and use of the data should be integrated – Micro data are best gathered locally – Success of public-private partnership model Connect Kentucky, Connected Nation Various means for helping the market to work – Not universal service – Demand development – Matching demand with investment – Tax and other incentives, existing funding sources State public-private partnerships as a “farm system” to identify projects for federal funding – New mechanisms for tax incentives, loans, or grants – Learn from other countries – Competitive bidding for contracts