One Gigabit or Bust TM Initiative:A Broadband Vision For California

Kathie Hackler

Research Vice President

June 16, 2003

The Study Process and Outcomes

Gartner assessed the economic potential of an acceleration of ubiquitous Next-Generation-Broadband utilization in California.

Our assessment included interviews of the top broadband thinkers, policy makers and consumer advocates within the State, the nation and the world.

The resulting report summarizes the economic benefit, key issues, and recommendations for next steps.

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Key Findings

Significant economic growth opportunityfor California

A variety of agendas

No new single killer application

No agreement on the characteristicsof broadband

Leadership is essential

Globalization requires action now

Waves of Technology Drive Windowsof Economic Growth

As each technology is absorbed it becomes the basis for another subsequent wave

Economic Growth

Time

Telephony

PC/LAN

Internet

Networked Economy

Shows Wave of Technology in growth

Wave of Technology falls off shows it is Industrialized

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Impact of the Introduction of Broadband on GDP/GSP

$40K

50%

73%

Main Telephone Lines

GD

P p

er C

apit

al

20%

Broadband Penetration $25K

$39K

9% 20%

$46K

GDPC in reference to PSTN Line %

Additional Impact byBroadband on GDPC

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

The Utilization of Broadband Can Have a Major Impact on Productivity

$376 Billion Opportunity

Applying the methodology to a broadband penetration of 50% per capita produces a substantial opportunity to increase California’s Gross State Product by 2010

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

GSP per Capita: $46,447

$1.41-Trillion10-Year Accum.

Year 2000 Year 2010

Base Point GSP per Capita: $39,698

$367 Billion Inc.$367 Billion Inc.

$1.03 Trillion Baseline

Increases in jobs reflect new jobs created by reorganization of industries as well as retention of jobs within California industries

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

20 Million Jobs Added Over Total of 10 Years

Year 2000 Year 2010

Base Point Jobs: 14 Million

+2MM+2MMIncremental JobsIncremental Jobs

18MM Base

Two Million Incremental Jobs

Broadband must be integrated and utilized within the communications infrastructure — it must be ubiquitous.

We do not advocate: Field of Dreams investments Massive government funding Waiting for a “Killer App”

We advocate making Next Generation Broadband a viable communications platform

Focusing on speed, bandwidth, capacity or a “Killer Application” ignores the real opportunity

The opportunity is millions of ordinary tasks and events that are made better, easier or more productive.

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

One Gigabit Is NOT About Technology, It Is About the Capabilities Enabled

Group AgendaService Providers Both cable and telcos want

change only in the context ofcurrent business models andsome use regulation as anexcuse or delaying tactic.Both cable and telcos arestruggling with changes totheir business models andcompetition from alternateproviders and technologies.

State Legislators Have the willingness toadvance a popular broadbandagenda but many may notunderstand what broadbandis or what it means. They maylack the technical knowledgeto create a long-term vision.Legislation is oftenreactionary to a perceivedneed.

State Regulators View that they’ve dealt withbroadband in previousproceedings. They‘reconcerned about the utility—and are focused on identifyingthe cost versus the benefits.

Consumer Advocates Understand that theirconstituents may notrecognize the specific valueof these issues. They say thatbroadband access is not aluxury and providersoverstate costs.

Economic DevelopmentGroups

Face an uphill battleespecially outside the first tiermarkets getting providers toinvest. Must deal with issuesbeyond the technology itselfsuch as technical literacy.

Municipalities Are frustrated and viewbroadband as an economicdevelopment necessity andare looking for ways to protectexisting revenues and createnew revenue sources. Someare taking matters into theirown hands.

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Dichotomy of Interests

Our interviews repeatedly revealed conflicts of goalsand objectives.

Broadband means different things to people

Only exceptionally strong leadership will succeed

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Broadband Vision and Leadership —Both Top-Down and Bottom-Up

There must be leadership that can: Understand the interests of all stakeholders and

bridge differences Understand the complex technology issues and

separate the real issues from the red herrings Develop partnerships and collaboration

between the hundreds, possibly thousands,of stakeholders

Navigate the treacherous political waters and survive the boom or bust funding cycles

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Forward-looking Public Policy Can Clearthe Way Encourage collaborative efforts of the State, counties and

municipalities Establish a clearinghouse for best practices Create “regulatory free” zones Participate in solving intellectual property issues at the

national level Eliminate administrative barriers (such as right-of-way) Require new housing developments to include fiber or

conduits for fiber Become an anchor tenant Require broadband be capable of replacing existing

communications services

These actions do not require direct government funding

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Gartner Has Identified Several Action Steps

Identification of a leader or leadership team Development of a business plan Construction of implementation scenarios Development of specific costs Demand aggregation and anchor tenancy Coordination of regulatory/legislative policy

between federal, state and local entities Public and private partnerships Commercial broadband market test beds

A Call to Action

California Has a Choice — Lead, Follow or Get Out of the Way

Today, high technology, entertainment, biotechnology, agriculture and many more industries call California home. California has the most to gain from action and the most to lose from inaction. Other regions will welcome these industries and are taking steps to attract them.Now is the time to choose California’s future.

© 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

One Gigabit or Bust TM Initiative:A Broadband Vision For California

Kathie Hackler

June 16, 2003