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For the first time, the online services industry is seeing

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For the first time, the online services industry is seeing

    Proposed Legislation and Its Impact

    On Consumer’s Use Of

    Broadband and IP Services

An examination of the needs and expectations

    for broadband content and applications by U.S.

     Seniors, Asian-Americans, African-Americans,

    Hispanic-Americans and others

    April 11, 2006

    US Internet Industry Association

    2

    Author: David P. McClure Publication Date: April 11, 2006 Published by: US Internet Industry Association

     1800 Diagonal Road

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     Alexandria, va 22314

     (703) 647-7440 Voice

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    Info.3@usiia.org

    http://www.usiia.org

Formed in 1994, the US Internet Industry Association is the primary trade association for companies

    engaged in Internet commerce, content and connectivity. USIIA serves its members through legislative

    advocacy and professional services. The association is headquartered in Washington, DC.

    David P. McClure is President and Chief Executive Officer of the US Internet Industry Association. A technologist by education and experience, McClure has held positions in the Internet, computing, aerospace

    and environmental services industries. He is widely published on technical and business topics, and is the

    author of more than 20 white papers related to Internet and Broadband policy, governance and economics.

? Copyright 2006, US Internet Industry Association. All rights reserved.

    3

    Table of Contents

    Executive Summary ..................................................................................................................... 4

    Introduction ................................................................................................................................. 7

    IP and Broadband Services.......................................................................................................... 8

    Ethnicity in America .................................................................................................................... 9

    Overviews of the Segments ..........................................................................................................11

     The Seniors Segment ...............................................................................................................12

     The Asian-American Segment .................................................................................................15

     The Hispanic-American Segment ............................................................................................16

     The African-American Segment ..............................................................................................17

    Utilization of IP and Broadband Services ....................................................................................18

     Voice Over IP..........................................................................................................................19

     Security and Privacy Tools .....................................................................................................20

     Video On Demand and Download Services ............................................................................21

     Health Care .............................................................................................................................22

     Telecommuting ........................................................................................................................23

     Summary .................................................................................................................................24

    Ramifications For Public Policy ...................................................................................................25

     “Digital Divide”.......................................................................................................................25

     Universal Service Fund Reform ..............................................................................................26

     Franchise Reform ....................................................................................................................27

     Network Neutrality .................................................................................................................27

    4

    Executive Summary

As the composition of the US population changes, the needs, expectations, skills, experiences and demands

    of consumers are changing as well. And the Internet is changing as well -- it has evolved from a closed

    system to a very popular open system that many Americans rely on to conduct their everyday lives. About

    3 of 4 households use the Internet, up from one in a hundred just a decade ago. American businesses have

    harnessed the Internet to drive down costs, improve on customer service and enhance global

    competitiveness.

As the Internet has changed and gained popularity, it has moved from being a tool of the intellectual and

    technological elite to a tool used extensively by all segments of the US population, even by some once

    perceived as disenfranchised and disconnected. Quite simply, the Internet has been integrated into the

    American way of life.

At the same time, the combined effects of swelling ranks of Internet users and rapid adoption of

    sophisticated Internet-based applications have laid bare some shortcomings in security, speed, and other

    capabilities inherent in commercial Internet v1.0. It is not surprising to see major changes at the point

    where these factors intersect in the deployment and use of IP and broadband services. Public policies

    related to the Internet must be adjusted to accommodate these evolving consumer needs and the

    technologies that serve them.

    The Telecommunications Act of 1996 identified a set of ―advanced telecommunications capabilities‖ that today are better known as ―broadband and IP services:‖

    “The term `advanced telecommunications capability' is defined, without regard to

    any transmission media or technology, as high-speed, switched, broadband

    telecommunications capability that enables users to originate and receive high-

    1quality voice, data, graphics, and video telecommunications using any technology.”

In 2000, U.S. Census data showed that non-White populations (primarily African-Americans, Asian-

    Americans and Hispanics) totaled 25 percent of the US population. But the CIA World Fact data indicates

     1 Telecommunications Act of 1996, at Section 706 (C).

    5

    that Non-White populations will grow to 35.7% by 2020, and to 47% by 2050. Hispanic populations will

    dominate, followed by African-American and Asian-American populations. While the Seniors population

    will grow with the ―Boomer Bulge‖ starting this year, it will comprise proportionally less of the population

    due to the influx of younger immigrants and higher birthrates among minorities. The buying habits of these

    fast-growing segments illustrate the pace of change that the Internet must accommodate:

    ? Ethnic populations and seniors use IP and broadband services differently than Non-Hispanic

    Whites, but they do make these technologies a significant part of their daily lives. In fact, more

    than 90 percent of English-speaking Asian-Americans and 80 percent of English-speaking

    Hispanics routinely use IP and broadband services, significantly out-pacing Whites.

    ? Ethnic minorities are among the most significant subscribers to all services, making them a key

    target market for all forms of IP services. In addition, the Hispanic, African-American and Asian-

    American audiences have shown a preference for bundled services, making them more attractive to

    services that can offer such bundles.

    ? Seniors age 65 and older generally follow the preferences of their ethnic groups, except that they

    are less inclined as age progresses to adopt new technologies and therefore are less inclined to user

    IP services. This will change as the percentage of non-White seniors grows in coming decades, and

    as Americans already using the technology age.

    ? Populations will continue to be concentrated in urban centers, but ethnic minorities will continue to

    move into suburban and rural areas until their distribution mirrors that of White families. This

    transformation will occur faster among US-born ethnic populations than among more recent

    immigrants.

    ? The ―racial‖ Digital Divide is rapidly closing as ethnic minorities embrace both broadband Internet

    and video services. Differences in adoption rates for IP services cannot be ascribed easily to ethnic

    heritage more critical factors in adoption and utilization rates are education (and by correlation,

    family income); geographic location; age; and fluency in English.

The evidence of these trends differs from conventional wisdom. It is therefore critical that public policy

    makers move cautiously before committing to courses of action that can damage rather than enhance the

    6 way and pace at which new technologies can benefit these segments. This is particularly the case with

    current policy discussion on the ―Digital Divide,‖ franchise reform for video services, the glibly-named but

    misunderstood ―Network Neutrality, and proposed reforms to the Universal Service Fund.

As the availability of broadband has expanded, and prices have declined, broadband usage is up. We stand

    at a time when providers are planning to make significant investments in capital to bring higher bandwidth

    and greater choice to consumers. It is important that public policy initiatives reinforce and support ways to

    increase investment in IP and broadband services, in order to increase customer choice.

The changing face of America stands to benefit greatly from the deployment of these networks.

    7

    Introduction

    America is changing.

The composition of the population is changing. The needs, expectations, skills and experiences of

    consumers are changing. And the Internet is changing, too -- it has evolved from a closed system into a

    very popular open system that many Americans rely on to conduct their everyday lives. About 3 of 4

    households use the Internet, up from one in a hundred a decade ago. American businesses have harnessed

    the Internet to drive down costs, and to improve on customer service and international competitiveness.

As the Internet has changed and gained popularity, it has moved from being a tool of the intellectual and

    technological elite to a tool used extensively by all segments of the US population, even by some once

    perceived as disenfranchised and disconnected.

At the same time, the combined effects of swelling ranks of Internet users and rapid adoption of

    sophisticated Internet-based applications have laid bare some shortcomings in security, speed, and other

    capabilities inherent in commercial Internet v1.0. It is not surprising to see major changes at the point

    where these factors intersect in the deployment and use of IP and broadband services. Internet pioneer Dave Farber suggests that today’s Internet is long in the tooth and in need of major thinking and upgrades:

    ―We have seen the Internet become a truly mass market phenomenon, reaching more than

    half of all American households. Broadband networks have been and are being deployed

    that are moving us towards higher levels of speed and capability. My concern with all of

    the debate and discussion I've reviewed to date is that there is far too little solid, in depth

    analysis and understanding on all sides and their implications on the future of the Internet.

    As one of those who has been involved with the Internet since its earliest days, I do think it

    is getting old. There are improvements that can and must be made in how the Internet

    handles security for example and some applications - like video -- would clearly be

    2enhanced by specialized services or network functionalities to make them work better.‖

Likewise, a changing Internet will require us to rethink America’s efforts to deploy and use IP and

    broadband services, notably video and security capabilities. And the public policies that support this

    deployment and use must be very carefully and thoughtfully adjusted to accommodate these evolving

    consumer needs and the technologies that serve them.

2 A note on Net Neutrality and my reaction to the current debate,‖ David Farber in his memo to

    ip@v2.listbox.com, March 22, 2006.

    8

    stThis paper examines the new and emerging technologies of the 21 Century, with focus on the application of IP and broadband services related to information, education, health care, security and

    entertainment. It evaluates four major demographic segments of the US population African-Americans,

    Hispanic-Americans, Asian-Americans, and the senior population comprised of Americans age 65 and

    older. And it summarizes data on the use and expressed needs of IP and broadband services among these

    consumer segments.

    Finally, this paper correlates the data on each segment’s use and need for these services with current public policy issues related to the deployment of IP services and broadband nationwide.

IP and Broadband Services

    3For the purpose of this paper, ―broadband and IP services‖ may be defined as the set of advanced telecommunications capabilities set forth in the Telecommunications Act of 1996:

    “The term `advanced telecommunications capability' is defined, without regard to

    any transmission media or technology, as high-speed, switched, broadband

    telecommunications capability that enables users to originate and receive high-

    4quality voice, data, graphics, and video telecommunications using any technology.”

At present, these services include but are not limited to:

    ? High-speed Internet services, comprised of Internet transactions at 200 Kbps or higher

    ? Voice communications via packet-switched networks, also known as VoIP

    ? Video programming services

    ? Video on Demand services

    ? Telecommuting services

    ? Security services for residential and business physical properties

    3 Though used interchangeably in some discussions, broadband Internet Internet service delivered over a broadband network --is not precisely the same as ―broadband,‖ which generally refers to data transmissions in which two or more signals share a medium. Nor is broadband identical to IP services, which refer to the

    transmission of data and data streams over the Internet protocols, sometimes also called ―packetizing‖ the data 4 Telecommunications Act of 1996, at Section 706 (C).

    9

    ? Health care monitoring and emergency response

    ? Distance learning and other education initiatives

While variants of these services have existed for decades, only in the past five years have they been carried

    over the same transmission media using the Internet protocols. It is important to note for purposes of

    stpolicy discussions that the 21 century will see the first time in which a single medium wireless, coax,

    copper or fiber will simultaneously deliver all of these services and more.

Ethnicity in America

    According to the US Census Bureau, the period from 1990 to 2000 saw the largest population increase of

    any period in American history. In 2000, 281.4 million people were counted in the United States, a 13.2

    percent increase from the 1990 census population of 248.7 million. That growth varied geographically,

    5with large population increases in some areas and little growth or decline in others. The rate of growth is

    not abating. By July of 2002 the US population had grown to 288.4 million a 2.47% increase over the

    6Census 2000 figures. Census Bureau analysts expect the population to reach 300 million by October of

    72006, and 400 million in less than 40 years.

    8That population growth rate differed among ethnic groups that comprise the population. The Non-

    Hispanic White population grew by only 8.6 percent; the African-American population grew by 21.5

    percent; the Asian-American population by 43.1 percent, and the Hispanic population by a massive 57.9

    9percent. The Hispanic-American, African-American and Asian-American segments in 2005 accounted for

    14.1%, 12.9% and 4.2% of the American population, respectively, according to 2005 CIA World Fact data.

    While much of this population growth was driven by immigration it is also driven by higher birth rates

    shown by minority segments.

     5 US Census Bureau, ―2000 Population Change and Distribution,‖ at

    http://www.census.gov/prod/2001pubs/c2kbr01-2.pdf 6 Demographics of the United States at http://en.wikipedia.org/wiki/Demographics_of_the_United_States 7 See http://www.voanews.com/english/2006-03-08-voa25.cfm 8 This paper uses only the major ethnic populations of Non-Hispanic White, African-American (Black), Asian-

    American and Hispanic-American. It does not consider the minorities of one percent or less of the population; nor

    does it consider groups of multiple ethnic heritages. 9 US Census Bureau, Census 2000 Briefs, at http://www.census.gov/population/www/cen2000/briefs.html

    10 The CIA World Fact data indicates Non-White populations will grow to 35.7% by 2020, and by 2050

    ethnic non-whites will comprise 47% of the US Population of nearly 400 million people. Hispanic/Latino

    populations will be most numerous, followed by Black/African-American populations and Asian-American

    populations. Seniors will comprise proportionally less of the population than today due to the influx of

    younger immigrants and higher birthrates among minority segments.

The population shifts underway in America will have significant social and economic factors

    related to the US economy. Consider a brief comparison of the social and economic standings

    among Whites, African-Americans, Asian-Americans and Hispanics relating to education,

    English-language fluency and other factors:

    Whites Blacks Hispanics/ Asian Cambodian,

    Latinos Indians Hmong, or Laotian

    Not Proficient in English 0.7 0.8 30.3 8.4 44.3

    Less than High School 15.3 29.1 48.5 12.6 52.7

    College Degree 25.3 13.6 9.9 64.4 9.2

    Advanced Degree 3.0 1.2 1.6 12.5 0.4

    Median Personal Income $23,640 $16,300 $14,400 $26,000 $16,000

    Median Family Income $48,500 $33,300 $36,000 $69,470 $43,850

    Living in Poverty 9.4 24.9 21.4 8.2 22.5

    Married, Spouse Present 64.5 38.0 56.3 74.9 66.6

    Homeowner 78.2 54.4 52.4 56.8 53.3

    In Labor Force 63.6 59.8 61.5 71.0 58.8

    High Skill Occupation 21.4 12.3 9.6 51.6 9.8

    Median SEI Score 47.0 44.0 26.0 65.0 18.0

    Illustration #1 10“Differences in Socioeconomic Achievement”

In general socioeconomic terms, Americans are better off than in previous generations. The Urban

    Institute’s 2002 Annual Survey of America’s Families found that:

     10 See http://www.asian-nation.org/demographics.shtml

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