1. © Strategic Networks Group, Inc. 2014 The Return from Investment in Broadband Infrastructure and Utilization Initiatives Insights from the 2014 SNG White Paper Border to Border Broadband: A Call to Action February 5, 2014 Saint Paul, Minnesota

2. © Strategic Networks Group, Inc. 2014 2 WE ARE a global leader in broadband planning for socio-economic development WE PROVIDE data and insights to increase broadband utilization and impacts WE DELIVER strategies for economic development and community transformation through broadband Some of our clients: Making Broadband Work and Proving it

3. © Strategic Networks Group, Inc. 2014 3 Let’s Start With What We Know… There is a relationship between broadband and economic development. SNG research in the U.S shows… – 56% of businesses and organizations said broadband is essential for remaining in current location – 56% of households said they would definitely/likely relocate if broadband was not available – 32% of households work from home or have a home- based business Source: SNG Digital Economy Database n = 19,951 businesses and 9,318 households

4. © Strategic Networks Group, Inc. 2014 4 …and Broadband Means Jobs Percent of New Jobs Related to Internet By Size of Employer Group Broadband is responsible for 23.4% of all new jobs Source: SNG Digital Economy Database n = 6,177 Small businesses create 12x more Internet jobs relative to large firms

5. © Strategic Networks Group, Inc. 2014 5 SNG Broadband Research in Illinois Source: SNG Digital Economy Database for Illinois n = 7,225 Average DEi score by region Study was conducted in 2012 statewide Collected broadband metrics from over:  4,329 commercial businesses  2,896 community anchor institutions  2,058 households Provided actionable insights on broadband utilization and impacts in Illinois Provided actionable insights on broadband utilization and impacts in Illinois

6. © Strategic Networks Group, Inc. 2014 6 Our Broadband Research Methodology Data collection from thousands of local businesses, organizations and households 110 advanced broadband metrics are collected from each respondent 17 broadband utilization categories for businesses and 30 categories for households Quantified broadband impacts on revenues, cost savings, and job creation Focus on industry sectors, community anchor institutions, etc. Benefits and barriers, skills, awareness, telework, home business, etc.

7. © Strategic Networks Group, Inc. 2014 7 SNG Put Data into Action Data analysis leading to statewide, regional and business individual assessments Personalized strategic action to improve broadband utilization Understand the local market demand for broadband Assess potential socio-economic impacts (community ROI) Develop an action plan for regions and individual businesses/organizations that will achieve desired results

8. © Strategic Networks Group, Inc. 2014 8 Based on Average DEi Score - Source: SNG Digital Economy Database for Illinois n = 7,225 Illinois: Utilization by Region and Industry Cross referencing data enables to develop customized strategies

9. © Strategic Networks Group, Inc. 2014 9 Illinois: Planning Utilization Increase

10. © Strategic Networks Group, Inc. 2014 10 Digital Divide Showed in Real Numbers Based on Average DEi Score - Source: SNG Digital Economy Database for Illinois n = 2,125

11. © Strategic Networks Group, Inc. 2014 11 2014 White Paper for Blandin Foundation Used our proprietary database on broadband impacts to study the ROI in Broadband Infrastructure and Utilization Initiatives Focus on 2 areas: Lac qui Parle County, 100% broadband coverage Kanabec County, only 27% broadband coverage Inside these areas, the paper focuses on three industry sectors Manufacturing Professional and Technical Services Retail Trade

12. © Strategic Networks Group, Inc. 2014 12 Incremental Impacts for Lac qui Parle County Incremental Revenues and Savings From New eSolutions – Lac qui Parle County Industry Total All Businesses Incremental Revenue from new eSolutions Incremental Cost Savings from new eSolutions Total Incremental Impact Manufacturing10$429,000$40,000$469,000 Professional & Technical Services 9$66,000$2,000$68,000 Retail Trade38$725,000$34,000$760,000 TOTAL57$1,220,000$77,000$1,297,000

13. © Strategic Networks Group, Inc. 2014 13 Incremental Impacts for Kanabec County Incremental Revenues and Savings From New eSolutions – Kanabec County Industry Total All Businesses Incremental Revenue from new eSolutions Incremental Cost Savings from new eSolutions Total Incremental Impact Manufacturing19$7,987,000$1,264,000$9,251,000 Professional & Technical Services 18$1,404,000$100,000$1,504,000 Retail Trade45$8,840,000$802,000$9,642,000 TOTAL82$18,231,000$2,166,000$20,397,000

14. © Strategic Networks Group, Inc. 2014 14 Projected Impacts for Lac qui Parle County $1.3 million↑ in total incremental impacts 22 jobs created $529,000 ↑ household income Impact on GDP: $1.4 million ↑ $148,000 ↑ direct tax revenues

15. © Strategic Networks Group, Inc. 2014 15 Projected Impacts for Kanabec County $20.4 million ↑ in total incremental impacts 310 jobs created $6.6 million ↑ household income Impact on GDP: $21.6 million ↑ $2.3 million ↑ direct tax revenues

16. © Strategic Networks Group, Inc. 2014 16 Increasing Broadband Utilization ManufacturingProfessional & Technical ServicesRetail Trade Selling goods or services Web site for organization Advertising and promotion Customer service and support Deliver services and content Supplier communication and coordination TeleworkingSocial networking Staff training and skills development Deliver services and content Staff training and skills development TeleworkingSocial networkingAccessing collaborative tools Based on SNG research, the eSolutions below have the greatest impact for each sector. Challenge: how to raise awareness and drive utilization of these esolutions?

17. © Strategic Networks Group, Inc. 2014 The Field of Dreams Technology is not enough

18. © Strategic Networks Group, Inc. 2014 18 With BB Coverage, is the job done? The situation in North Georgia “Traditional marketing to customers wasn’t going to get our network to sustainability.” Bruce Abraham, President, North Georgia Network Government investment of $43 million in 2009 to support FTTH network Needed for local economic development in rural region north of Atlanta 18% had taken up the service by Q2 2012 Network not sustainable by November 2012 – need closer to 30% take-up  Hired SNG to raise awareness and drive utilization with customers BUT

19. © Strategic Networks Group, Inc. 2014 19 Availability Adoption Utilization Broadband …

20. © Strategic Networks Group, Inc. 2014 20 In the Broadband equation, the quality of each input affects the outcome Utilization Average Lagging Technology Technology Low Utilization Poor Utilization Technology BENEFITS Take a Comprehensive Look at Broadband

21. © Strategic Networks Group, Inc. 2014 21 Revenues from network subscriptions - Investment, operations & maintenance costs = PROFIT Operators Local Economy Increased productivity and competitiveness, increased revenues, new jobs, better quality of life, etc. - Investment, utilization programs and support = BENEFITS FOR THE COMMUNITY Why we Build Broadband Networks “Off- balance- sheet”

22. © Strategic Networks Group, Inc. 2014 Adoption and Utilization Is Key How SNG Helps Drive Utilization

23. © Strategic Networks Group, Inc. 2014 23 “Crossing the Chasm” Why “build-it and they will come” does not work? → Because people buy benefits, not features … so driving awareness and utilization is the next challenge For further information, see “No Field of Dreams: Eliminating the Waiting Game and Driving Uptake”No Field of Dreams: Eliminating the Waiting Game and Driving Uptake

24. © Strategic Networks Group, Inc. 2014 24 Impact of Driving Utilization Network operators are typically* not sustainable with a “build it and they will come approach” * Financial profile of typical fiber network build. Source: Ventura Team LLP, www.venturateam.comwww.venturateam.com Laissez-faire (A)Driving Utilization (B) Year One10% uptake12% uptake Year Three18% uptake35% uptake Internal Rate of Return (IRR) at year 3 5%24%

25. © Strategic Networks Group, Inc. 2014 25 Source: SNG Digital Economy Database Fear of the unknown overrules slow Internet as a barrier The Biggest Barrier is Not Knowing

26. © Strategic Networks Group, Inc. 2014 26 The right metrics and data help you: Understand the local market demand for broadband Assess potential socio-economic impacts (community ROI) Develop an action plan for regions and individual businesses/organizations that will achieve desired results Active, Actionable Data Is the Key to Capitalizing on the Transformative Economic Benefits of Broadband

27. © Strategic Networks Group, Inc. 2014 What is important to measure for driving adoption? The SNG Data Collection Process

28. © Strategic Networks Group, Inc. 2014 28 What are Broadband Metrics? 28 Census Data - good to haveActive broadband metrics - need to have Type of connection Measure broadband speed vs. advertised speed Broadband speed Broadband satisfaction by end-users Material resources Utilization of Internet enabled tools and processes Benefits from broadband on daily operations Barriers to adopt broadband and to use Internet enabled tools and processes Quantified impacts from broadband on revenues, cost savings Quantified impacts on job creation Skills needed and preferred method of acquisitions Digital Economy index scoring at an individual level - industry sector level, regional level, etc. Special use and daily benefits metrics for Community anchors institutions Industry sector focus studies, comparison and benchmarking Regional focus studies and comparison

29. © Strategic Networks Group, Inc. 2014 29 Need metrics to know……. where are we now? … and how much closer are we to our goal?

30. © Strategic Networks Group, Inc. 2014 30 So What Should You Measure? Utilization How businesses, organizations, and households are currently using, or planning to use broadband and e-solutions. Gaps and Barriers Where the gaps in the utilization of e-solutions are and which factors inhibit, or prevent adoption. Drivers and Needs Understanding the needs and preferences of end- users in order to raise awareness, to increase adoption, and to drive effective utilization. Benefits How things have improved and which e-solutions have benefitted businesses, organizations, and households. Impacts Quantify benefits in terms of new revenues, cost efficiencies, new jobs, quality of life, etc. Profile Data Internet connection type, tested speed, length of time using broadband, organization size, industry sector classification, demographics, etc.

31. © Strategic Networks Group, Inc. 2014 31 We uncover Internet use at a micro-level and benchmark against peers 17 e-solutions 1 by businesses / organizations 30 e-solutions 1 by households Utilization data collected 2 by SNG directly from 27,150 businesses / organizations And 12,400 households. SNG has normative database with deep insights on Internet usage and impacts – over 110 metrics for each record. Results shown use SNG’s Digital Economy index (DEi), a composite score between 1 and 10 to reflect level of Internet utilization. 1. Internet-enabled applications and processes; 2. Between 2008-2013 How SNG Measures Utilization

32. © Strategic Networks Group, Inc. 2014 32 What’s so hard about utilization? Quick to Adopt ‘Laissez-faire’ approach “Okay” Slow to Adopt Need to ‘lead horse to water’ Business Applications Buying OnlineSelling Online Basic WebsiteOnline media (video) Research and accessing information Teleworking e-mailDelivering Content and Services Document transferSocial Networking Household Applications e-mailEntertainment BankingInvestments and Trading News and SportsVoIP Information gatheringHome Based Business BIGGEST BENEFITS

33. © Strategic Networks Group, Inc. 2014 Identify Broadband Impacts Benefits from the Digital Economy

34. © Strategic Networks Group, Inc. 2014 34 Increased Utilization Directly Correlates to Revenue Growth Businesses underutilizing the Internet miss significant revenue opportunities

35. © Strategic Networks Group, Inc. 2014 35 Why Drive Utilization? For an individual business or organization, increasing utilization by 10% means: Increasing revenues by 24% Decreasing costs by 7% For a Region, it means : Allowing businesses to be more competitive Creating a demand for high-skilled workers Adding fiscal revenues Average multipliers identified by SNG from over 12,000 data records collected in 2009-10.

36. © Strategic Networks Group, Inc. 2014 Motivating Business Broadband Utilization Tools for Economic Development

37. © Strategic Networks Group, Inc. 2014 37 Business Assessment Survey DEi Scorecard Financial Impact Calculator e-Business Tactics How is the business using esolutions? Measure current uses and benefits Create greater awareness Where are gaps and opportunities ? Motivation Compare to peers Reveal financial benefits What guidance does the business need? Engage and advise Run financial impact scenarios Choose esolution priorities How will businesses take action? Learning resources Choose the right tactics Develop a plan Take stock Review options Evaluate benefits Take action Helping Businesses Take Action

38. © Strategic Networks Group, Inc. 2014 38 SNG Recommendations for Minnesota There is an economic case for investing in broadband To promote broadband investment, increase coverage and drive utilization you need to: Engage local stakeholders to “own the process” Collect and use meaningful, actionable broadband data Illustrate local examples of broadband impacts

39. © Strategic Networks Group, Inc. 2014 39 Michael Curri, President Strategic Networks Group, Inc. +1 202.558.2128 mcurri@sngroup.com Let’s connect ! www.sngroup.com Thank You

40. © Strategic Networks Group, Inc. 2014 40 Industry Sector Profiles Sector Number of establishments (fewer than 250 employees) MinnesotaLac qui ParleKanabec Manufacturing7,0711019 Professional & Technical Services 16,375918 Retail Trade19,2873845 Both Lac qui Parle and Kanabec counties are rural and relatively small in terms of total business establishments (191 and 295, respectively) and total employment (1,945 and 3,188, respectively).

41. © Strategic Networks Group, Inc. 2014 41 Total Incremental Impacts – Lac qui Parle Incremental Impact From New eSolutions – Lac qui Parle County Sector Household Income Total Employment Total GDPTotal Tax Manufacturing$106,0004$386,000$46,000 Professional & Technical Services $25,0001$90,000$11,000 Retail Trade$398,00016$950,000$91,000 TOTAL$529,00022$1,426,000$148,000

42. © Strategic Networks Group, Inc. 2014 42 Total Incremental Impacts – Kanabec Incremental Impact From New eSolutions – Kanabec County Sector Household Income Total Employment Total GDPTotal Tax Manufacturing$1,784,00084$7,618,000$914,000 Professional & Technical Services $479,00022$1,976,000$252,000 Retail Trade$4,342,000204$12,050,000$1,153,000 TOTAL$6,605,000310$21,644,000$2,319,000

43. © Strategic Networks Group, Inc. 2014 43 A DEi Scorecard is delivered to each business and organization Individualized ‘broadband health check’ that: ‒ benchmarks competitiveness against peers ‒ estimates ROI from increased utilization ‒ provides links to local advisors and support Data based on the individual’s current broadband utilization against industry average Shared with local economic development agencies so they can raise awareness, increase adoption, and drive utilization Personalize Results: DEi Scorecard

44. © Strategic Networks Group, Inc. 2014 44 DEi Impact Calculator - choose e-strategy based on ROI - Source: SNG Digital Economy Database n = 27,200 1. Select your organization characteristics 2. Select your actual and needed e-Solutions

45. © Strategic Networks Group, Inc. 2014 45 4. Details of potential revenues and cost savings 3. See your potential benefits from increased utilization Source: SNG Digital Economy Database n = 27,200 DEi Impact Calculator - choose e-strategy based on ROI -