A Survey of Small Businesses’ 

Telecommunications Use and 

Spending 

by 

by Stephen B. Pociask, 

TeleNomic Research, LLC 

for 

under contract number SBA-HQ-02-M-0493 

Release Date: March 2004 

The statements, findings, conclusions, and recommendations found in this study are those of the authors 

and do not necessarily reflect the views of the Office of Advocacy, the United States Small Business 

Administration, or the United States Government. 
A Survey of Small Businesses’ Telecommunications 

Use and Spending 

Table of Contents 

 Page

Executive Summary i 

I. Introduction 1 

II. Background 1 

A. Changes Affecting Telecommunications 1 

B. Industry Changes Have Disparate Effects on Customer Market 2 

Segments 

C. Need For Better Data on Small Business Telecommunications Use 3 

D. Study Purpose and Importance 4 

III. A Survey of Small Businesses’ Telecommunications Use 5 

A. Response Rate and Representation 6 

B. Sample Size Requirements 6 

IV. Composition of Survey Results 7 

A. Overall Description of the Survey Population 7 

B. Understanding the Composition of Telecommunications Spending 9 

C. Detailed Composition of Spending by Industry 25 

V. Market Penetration and Usage 43 

A. Telecommunications Services Penetration Rates 43 

B. Expenditures of the Users of Telecommunications Services 44 

 VI. Summary Analysis of the Results 59 

A. Effects of Firm Size and the Burden of Telecommunications Costs 59 

B. Preference for Bundled Telecommunications Services 62 

C. Factors in Selecting Telecommunications Providers 63 

D. Average Expenditures per Unit 64 
Table of Contents 

(Continued) 

 Page

VII. Survey Results on Important Current Topics 66 

A. Local Competition 66 

B. Wireless Substitution 67 

C. Voice-over-Internet Protocol (VoIP) Services 68 

D. Internet Access and Broadband Services 69 

VIII. Summary 71 

Appendices 73 

A. Survey Questionnaire and Related Materials 73 

B. Comparisons of Industries by Type of Service 79 

For All Small Businesses 

C. Average Spending and Quantity 87 

For Users of Services Only 

D. Comparisons of Industries by Type of Service 104 

For Users of Services Only 

E. Other supplemental Survey Information 111 

About the Author 112 
i

A Survey of Small Businesses’ 

Telecommunications Use and Spending 

TeleNomic Research, LLC∗

Executive summary 

Small Businesses use a considerable amount and a wide variety of telecommunications 

services in the United States. Considering the many technological changes affecting the 

industry, as well as intense legislative and regulatory debates dealing with industry 

competition and high-speed Internet services, public policymakers require extensive 

information on how these changes affect consumers. However, public data on the small 

businesses’ use of telecommunications services are not well documented. Without 

adequate data on small businesses’ use of telecommunications services, the effects of 

technological and regulatory changes on small businesses cannot accurately be measured 

and understood. In order to address this deficiency, this report provides new data on 

small businesses, including the use of and expenditures for telecommunications services. 

This report defines a small business as one having fewer than 500 employees. 

A mail survey was conducted and 458 small business owners responded, providing 

information on employment size, industry, use and expenditures for various 

telecommunications services, and other important aspects of small business perceptions. 

Based on the sample population of the study, most small businesses are very small, 

averaging less than 9 employees. In fact, 31% of small business owners reported just one 

employee or less, and 47% of small business owners reported less than $200,000 in 

revenue in their latest year of operation. The sample of small businesses included 

respondents from the District of Columbia and forty-eight states, and these included a 

wide representation of industry groups, including construction, retail and service 

industries as the most numerous in the sample population. 

The sample results provide a trove of information on telecommunications use and 

expenditures. The key findings of this information are as follows: 

• Small businesses spend a considerable amount for telecommunications services. 

This report finds that small businesses spend on average $543.17 per month for 

telecommunications services, 89% of which are for local, long distance and 

wireless telephone services. The finance and insurance industry spends on 

average $1,803.99 per month, the highest among the major industries. 

Manufacturing ($723.75), wholesale trade ($786.09), transportation and 

warehousing ($701.21), and real estate, renting and leasing ($740.66) also spend 

substantially above average, while farming and agriculture ($196.61), retail trade 

($383.31), and accommodation and food services ($317.17) spend the least. This 

 

∗

 TeleNomic Research, LLC is an economic consulting firm and a small business located in Herndon, VA. 

For more information see www.TeleNomic.Com. 
ii

spending reflects, in part, the telecommunications intensity of the business, as 

well as differences in firm size among industries. 

• The cost burden of telecommunications services appears to be higher for very 

small businesses. For example, firms with 0 to 4 employees spend $82.81 per 

employee for local and long distance telephone service, while firms with 5-9 

employees spend $50.18 per employee and firms with 10-499 spend $20.99 per 

employee. This difference in spending means that very small firms pay 

disproportionately more for telecommunications services than other firms when 

operating their businesses. As a result, public policies that increase business 

expenditures are likely to adversely affect smaller businesses more than other 

businesses. 

• Signs of competition in the small business market segment for local telephone 

services appear evident from the survey data. Competitive Local Exchange 

Carriers (CLECs) now garner 22% of the small business market, with the 

remaining share belonging to incumbent local exchange carriers (ILECs). CLECs 

serve 29% of small businesses located in metropolitan areas, while only 11% of 

small businesses located in non-metropolitan areas. 

• The use of wireless telecommunications by small businesses is substantial 

compared to other telecommunications services. Wireless services are now used 

by 73% of small businesses, and 25% of all small businesses spend more for 

wireless services than they do for local and long distance telephone services 

combined. In fact, 6% of the small businesses using wireless services report no 

long distance spending, while 4% report no local telecommunications spending. 

The construction industry ($382.20), as well as the transportation and 

warehousing industry ($371.33), spend on average twice as much for wireless 

services as they spend for other services ($176.44). 

• As far as online services, 27% of small businesses do not subscribe to any Internet 

access service. Among the various forms of Internet access, dialup services are 

used by 38% of small businesses, while cable modems, DSL, Satellite, T-1 and 

wireless broadband services are used by 26%, 21%, 4%, 4% and 3%, respectively. 

However, when combined, broadband services are used by 48% of small 

businesses, an indication that some small businesses use multiple forms of 

broadband services. Furthermore, some broadband users continue to subscribe to 

dialup access services. 

• The survey reveals that cable modem service accounts for nearly half of the small 

business high-speed Internet market. The success of the cable market may reflect 

favorable pricing, access to home-based businesses and non-employer businesses, 

and successful efforts by cable companies to expand beyond residential video 

services into new offerings, such as voice and data, for business communities. 

• 3.3% of small businesses use Voice-over-Internet services – services that use the 

Internet to carry telephone-like conversations while bypassing telephone company 

networks and billing. 

The survey also gives information on firm size, use and expenditures and various aspects 

of small business perceptions. The survey results suggest that small businesses would 

prefer to buy combinations of telecommunications services (called bundles) from a single 
iii

provider. These bundles combine multiple services onto a single bill, usually at a price 

less than purchasing the services separately from different providers. For example, 79% 

of small businesses surveyed would prefer to buy telecommunications services in a 

bundle, and 85% of these small businesses would prefer their services combined on a 

single bill. From this, it appears that most small businesses want the convenience of a 

single bill and the savings from service bundling. 

The survey also provides insight into how small businesses choose telecommunications 

providers. When asked to rank the factors they use for selecting of a telecommunications 

provider, small business owners reported that quality and reliability were the most 

important factors to consider, followed closely by price and customer service. The name 

brand of the provider was the least important factor, by far, in deciding which 

telecommunications provider to select. 

Some data in this report have limitations in their use that future research should address. 

While the overall sample size of the data summarized in this report is sufficiently high to 

provide an accurate representation of small business telecommunications use, many of 

the tables shown in this report contain small sample sizes for various subgroups of 

industry, firm size and other factors. Because sample size is an important determinant of 

the statistical validity and reliability of the results, caution should be exercised for those 

subgroups containing a small sample size. However, subgroups with high sample sizes 

are subject to lower sampling error and higher reliability. Therefore, it is recommended 

that future surveys attempt to increase the sample size in order to provide more accurate 

insights into telecommunications use for these subgroups. Finally, periodic surveys of 

this nature would be useful in developing time series data and providing an important 

contribution to understanding the ongoing changes in the perception and consumption of 

telecommunications services. 

In summary, this report provides new and much needed data on small businesses’ use of 

telecommunications services. These data will be useful in understanding the wide variety 

of services and the magnitude of expenditures made by small businesses. The results of 

this survey will aid policymakers in understanding how regulatory, competitive and 

technological changes are affecting small businesses, and it can provide a basis to 

quantify disparate impacts on this important market segment. 
1

A Survey of Small Businesses’ 

Telecommunications Use and Spending 

TeleNomic Research, LLC∗

I. Introduction 

The goal of this report is to contribute to the collection of information on the use of 

telecommunications services by small businesses. In order to accomplish this goal, this 

report analyzes the results of a survey of 458 small businesses. The survey results 

provide rich detail on the use of telecommunications services by small businesses, 

including expenditures for local telephone, long distance telephone, wireless 

telecommunications and Internet access services. The survey responses provide useful 

insights into the consumption of telecommunications services as they pertain to 

geographic location, firm size and other pertinent factors. This report summarizes the 

highlights of the survey. 

The report includes six major sections. The first section to follow, Section II, provides 

an explanation of the purpose and importance of the report, while the remaining sections 

of the report address the survey and its results. Section III of this report provides the 

technical background on the survey, Section IV summarizes average telecommunications 

expenditures for all firms (users and nonusers of services) sampled in the survey, and 

Section V provides details on the average expenditures for users (only) of 

telecommunications services. Sections VI and Section VII provide an examination of 

the results as they pertain to important policy areas, including analyzing 

telecommunications expenditures as a cost burden on small businesses, estimating the 

extent of local telecommunications competition in the small business market, and 

measuring the use of broadband services by small businesses. It is hoped that these data 

and results will aid analysts, policymakers, advocates and others in better understanding 

telecommunications use by small businesses. 

II. Background 

A. Changes Affecting Telecommunications 

Sweeping changes in telecommunications public policies, competition and technology are 

having disparate effects on key consumer market segments – namely, residential, small 

 

∗ TeleNomic Research, LLC is an economic consulting firm and a small business located in Herndon, VA. 

For more information see www.TeleNomic.Com. The author wishes to acknowledge Anne Danehy, 

president of Strategic Opinion Research for her comments on the survey and study design; Barbara Kasoff, 

president of GrassRoots Impact, Inc. for providing small business addresses during the survey pretest; and 

Dr. Radwan Saade, economist of the Office of Advocacy (Small Business Administration), for his helpful 

comments on this report. All errors and omissions are solely the responsibility of the author. 
2

business and large business customers. Public policy changes have come about through 

changes in legislation, most notably from the passage and implementation of the 

Telecommunications Act of 1996 (the Act), and through changes in regulation, primarily 

at the direction of the Federal Communications Commission (FCC) and state public 

service commissions. Legislative and regulatory actions have affected market entry and 

competition, which have implications on prices, quality and availability of 

telecommunications services to consumers. Technical change has also greatly affected 

traditional telecommunications services, creating ongoing challenges for policymakers, 

who must discern the effects of these changes on various market segments. 

B. Industry Changes Have Disparate Effects on Customer Market Segments 

The extent to which changes in regulation, competition and technology affect various 

customer market segments – including residential, small business and large business 

customers – is an area of great importance. Yet, public policies and regulations 

sometimes promulgate rules that affect and treat market segments differently. This is 

particularly evident in regulations that affect prices between residential and business 

market segments. For example, in order to promote universal service (e.g., make 

residential rates more affordable and widely available), state commissions tend to keep 

residential telephone rates low at the expense of business rates. The result of this is that 

ILECs charge their business customers nearly twice as much as they charge their 

residential customers for telephone service.1

 Therefore, small business customers are 

likely to pay more for a telephone line than residential customers.2 

Firm size may be another major factor influencing expenditures.3 Through bulk 

purchases and competitive discounts, larger businesses may have opportunities to benefit 

from economies of scale, whereas smaller businesses may not. For example, large 

businesses may be more likely than small ones to use alternatives like Public Branch 

Exchange (PBX) systems, local area networks (LANs) and dedicated high-speed data 

services, like T-1 and T-3 lines. These and other alternatives can result in savings for 

businesses by aggregating calls and data traffic, assuming the firm has sufficient traffic 

volume to make these alternatives cost-effective. Small businesses are less likely to 

achieve the volumes necessary to use these alternatives or attain bulk discounts. For 

these reasons, the percent burden of telecommunications expenses (per employee) may be 

higher for smaller firms than for larger firms. 

 

1

 This is according to sample cities published in the Federal Communications Commission’s Reference 

Book on Rates, Price Indices and Expenditures for Telephone Services, July 2003, tables 1.10 and 1.3. For 

example, residential rates (including usage) are $26.01, $20.40, $22.24 and $25.41 (per line) in Alabama, 

Alaska, Arizona and Arkansas, while business customers rates are $48.94, $34.71, $44.31 and $44.69, 

respectively. 

2

 Of course, small business owners that operate out of their homes may be using and paying for a 

residential line for their business. 

3

 This study will use the number of employees as a surrogate for firm size. For the purpose of 

standardizing costs across different sized firms, a measure of telecommunications expenses per employee 

will be used. A per employee standardization has been used in the past to measure cost burdens by firm 

size. For example, see W. Mark Crain and Thomas D. Hopkins, “The Impact of Regulatory Costs on Small 

Businesses,” Report for the Office of Advocacy, U.S. Small Business Administration, RFP No. SBAHQ00-R-0027, 2001. 
3

Therefore, small businesses may spend more than residential customers, because of 

universal service pricing; and they may be spending more than larger business customers, 

because costs per employee are higher.4

 While this may seem to be a reasonable 

supposition, there is insufficient empirical data in the public domain to test whether small 

businesses are adversely impacted by these regulatory and economic influences. 

C. Need For Better Data On Small Business Telecommunications Use 

Federal statistical agencies collect extensive information on industry and firm size, but 

they do not collect information on telecommunications used by small businesses.5

 

Consumer expenditures for telecommunications services and telephone price indexes are 

publicly available, but similar coverage for small businesses is not. While there is 

extensive public data on small businesses, these data do not report information related to 

telecommunications use or expenditures.6

 While the FCC collects voluminous data from 

telecommunications service providers, these data are often too aggregated to provide 

insight into small businesses’ use of telecommunications services. To the extent that 

public data for market segments exist, it is limited primarily to the residential customer 

market segment. 

Outside of the government agencies, studies on small business telecommunications 

services are occasionally conducted. These studies are often proprietary, for-fee by 

consultants, limited in sample size and may under-represent the smallest of firms. Other 

studies focus on only one aspect of telecommunications or one particular service. In 

short, there is no publicly available comprehensive source of data on small business use 

of telecommunications services. 

The lack of accurate and comprehensive data on small businesses use of 

telecommunications may leave policymakers guessing about how market segments are 

affected by legislative and regulatory actions. For example, when the FCC imposed 

different monthly subscriber line charges on single line business customers, secondary 

line customers and multi-line business customers, it did not know specifically how these 

rule changes would effect the small business market segment7

 In that instance, the FCC 

did not distinguish between small and large businesses, instead permitted phone 

 

4

 Larger firms may have higher costs, but, after standardizing for size, telecommunications cost per 

employee may be lower, compared with smaller firms. 

5

 For example, the U.S. Census Bureau compiles information on firm size in its County Business Patterns 

publication and its Economic Census, as well as information on firms with no employees its Nonemployer 

Statistics. 

6

 For example, see Small Business Economic Indicators for 2002, Office of Advocacy, Small Business 

Administration, June 2003. 

7

 The plan was proposed by the Coalition for Affordable Local and Long Distance Services and referred to 

as the CALLS Plan. For an example of the extent of residential and business data, as well as rural and 

urban data, see Stephen Pociask, “An Assessment of Consumer Welfare of the CALLS Plan,” filed with 

FCC by the Alliance for Public Technologies (APT), Oct. 25, 1999. 
4

companies to charge business customers differently depending on the number of 

telephone lines they subscribed to on their telephone account.8

 

Determining whether these regulatory and public policy changes adversely affect small 

businesses requires vastly more information on small businesses’ telecommunications use 

than is available today from public sources. It requires knowing what services are 

purchased and how much is purchased by small businesses. Therefore, while regulatory 

rules make distinctions between market segments, information on these market segments 

is incomplete for making a proper assessment of those policy effects. Thus, 

policymakers need better information on small businesses’ use of telecommunications 

services if they are to determine whether the promulgation of rules does, in fact, 

adversely affect small businesses. 

D. Study Purpose and Importance 

The purpose of this report is to add to the limited collection of information on small 

businesses as it pertains to the use and expenditures of telecommunications services. 

This information will include what services small businesses use, how consumption of 

telecommunications services varies by service type, revenue and employment size, 

location, industry and geography. 

Specifically, better data of small business telecommunications use would provide 

valuable information on a number of important topics. This data would provide insight 

into the degree of competition in the small business market segment, and what factors 

small businesses consider when choosing a telecommunications provider. These data 

would provide a better understanding of small businesses use of high-speed data 

networks, wireless telecommunications and Internet-based telephony (referred to as 

Voice over Internet Protocol services), a new service that replaces more traditional 

telecommunications services. 

Improved data on small businesses will aid in understanding and quantifying the effects 

of legislation and Federal regulations on small businesses, as required under Federal 

statutes. Congress established the Office of Advocacy in 1976 by Public Law No. 94-305 

to represent the views and interests of small businesses within the Federal government.9 

The Office of Advocacy’s statutory duties include serving as a focal point for the receipt 

of complaints concerning the government’s policies as they affect small businesses, 

developing proposals for changes in Federal agencies’ policies, and communicating these 

proposals to the agencies.10 The Office of Advocacy is further required to measure the 

direct costs and other effects of government regulation on small businesses, and make 

legislative and non-legislative proposals for eliminating excessive or unnecessary 

 

8

 Using the number of lines to distinguish a small business is very problematic. For example, a factory with 

600 employees may have five lines, but a real estate company with four employees may have six lines. 

Furthermore, a large business may have thousands of employees but only a few employees at any one 

location. Moreover, a satellite office for a large international corporation may count as a single line 

business, even though it is not a small business at all. Lastly, a company can have multiple business 

accounts in multiple states, which can affect the monthly charges assessed by local telephone companies. 9

 Public Law No. 94-305 (codified as amended at 15 U.S.C. § 734 a-g, 637). 

10 15 U.S.C. § 601c (1)-(4). 
5

regulations on small businesses.11 The Office of Advocacy also has a statutory duty to 

monitor and report to Congress on agencies’ compliance with the Regulatory Flexibility 

Act of 1980 (RFA), as amended by the Small Business Regulatory Enforcement Fairness 

Act (SBREFA) of 1996. This report will provide statistical information that can be used 

to assess whether legislative and regulatory rules, as they pertain to telecommunications, 

create a cost burden on smaller businesses. 

In short, better information on the small business market segment’s use of and 

expenditures for telecommunications services will aid in the understanding of how 

changes in telecommunications regulations, competition and technology will affect small 

business users. It is the purpose of this report to contribute to the collection of this 

information. 

III. Survey of Small Businesses’ Telecommunications Use 

A mail survey was conducted with the intent of creating a body of data that will provide 

useful insight into characteristics of small businesses’ use of telecommunications 

services.12 This survey attempts to expand and improve on an earlier survey of 

telecommunications use.13 The survey sample was selected from Survey Sampling 

International’s (SSI) database, Comprehensive Business Samples.

14 The database was 

chosen because of its extensive coverage of businesses, totaling 12 million business 

establishments with representation across industries.15 

A representative sample was drawn using a random start and systematic nth selection. 

Because SSI’s database is so extensive and the sample size for the study large, the risks 

of under-representation were manageable. For this report, the single area where underrepresentation was a concern was with the subpopulation of firms having very few 

employees. These very small firms are sometimes harder to locate and may have their 

business location at the owner’s home. However, since the distribution of small 

businesses are skewed and concentrated to the smallest of firms,16 the underrepresentation of this subpopulation was not a major risk. Telephone calls were made to 

small businesses, resulting in 46 additional mailed surveys that were sent, for the purpose 

of balancing the representation of the sample population to the overall universe. 

 

11 15 U.S.C. § 634 b (3). 

12 The questionnaire and cover letter are included in Appendix A of this report. 13 One earlier study utilized extensive detail from on small business bills, although only 61 firms were 

sampled. See Paul S. Brandon, “Flow through of January 1, 1998 Access Charge Changes to Small 

Business Customers,” NERA, Cambridge, MA, Sept. 17, 1998. 

14 For more information about the SSI database see www.surveysampling.com. 15 This represents more than half of the businesses in the U.S. As a common definition and one used in this 

study, a small business is one with fewer than 500 employees. 

16 According to the 1997 Economic Census and Statistics of U.S. Business, 48% of these firms had less 

than four employees. Therefore, very small firms make up the vast majority of small businesses. As 

mentioned earlier, a small business is one with fewer than 500 employees, a common definition in small 

business research statistics. 
6

A. Response Rate and Representation 

The response rate of the survey was 10.3%. This is based on the 5,046 surveys that were 

mailed, minus 582 surveys that were returned as undeliverable. Thus, 4,465 surveys 

remained in circulation. Of these surveys, 458 surveys were completed (or partially 

completed) and returned. Thus, the response rate was calculated as the percent responses 

to total surveys in circulation or 10.3%. 

A comparison of the distribution of firm size between the universe sample and the 

returned surveys found little difference. In making this comparison, the data for the 

universe of small businesses came from Small Business Economic Indicators: 2000, 

Office of Advocacy, Small Business Administration, Table A.1, p. 16, which showed that 

small business with less than 20 employees accounted for 89.8% of firms with less than 

500 employees. The results of this survey showed that 87.7% of the respondents had less 

than 20 employees, an indication that the sample is representative of the universe. As a 

second check, data for the year 2000 was used to produce weights for firm sizes 0-4, 5-9 

and 10-499.17 Using a proportional weighting method, average expenditures for local 

telephone services increased from $179.93 per firm (unweighted) to $180.37 (weighted 

by firm size). Taking into account the confidence limits around the mean, the weighted 

and unweighted expenditures were not statistically different. Given the lack of evidence, 

no under-representation found in the results based on firm size and the results were not 

weighted. 

 

B. Sample Size Requirements 

 The data that will be compiled and shown will note the number of respondents for each 

question, referred to as the sample size. Sample size becomes an important determinant 

of the statistical validity and reliability of the results. Larger sample sizes give much 

more precision and confidence to the results of a survey, while smaller sample sizes mean 

that the results are subject to higher sampling error and a lower level of confidence. 

Therefore, the number of respondents provides a way to judge confidence in the accuracy 

of the results.18 

The following sections will show the results of the survey. Many of the tables will show 

the sample size (labeled in the tables as N) for each subgroup, and provide an indication 

of the level of confidence associated with the sampled estimate. Caution should be 

exercised in the interpretation of results for any subgroups containing small sample sizes. 

 

17 For data on the universe of businesses by size, see www.sba.gov/advo/stats/us_tot.pdf, p. 1. 18 Assuming a 10% error and the universe of small business to be 22 million firms, a sample size of 96 

would be required to meet a confidence level of 95%, based on the NCS Pearson Survey Research Tool 

(www.pearsonncs.com/research-notes/). This means that the results are accurate within a confidence 

interval of plus or minus 2.5% -- or a range of 5%. It also means that 5% of the time an erroneous 

conclusion will be drawn based on the sample’s point estimate. Likewise, a sample size of 68 would be 

required to produce a confidence of 90% or accuracy within plus or minus 5%. Therefore, lower sample 

sizes produce less reliable results and should be used guardedly. Some of the detailed results shown in this 

study are below these acceptable levels and should be used with caution. 
7

IV. Composition of Survey Results 

The survey’s sample size (458) is sufficiently large to provide a desirable level of 

confidence, making the results a reasonably accurate representation of small businesses’ 

use of telecommunications services. Several respondents were very selective on which 

questions to answer, some answering only a few questions. For this reason, the number 

of responses varies from question to question. For example, some respondents provided 

both the quantity used and expenditure incurred for each telecommunications service, 

while some provided only the quantity used, some provided only the expenditures 

incurred, and some provided neither. The figures in this report reflect the 

September/October 2003 time period, and all expenditure figures are monthly. 

Because local and long distance services sometimes appear on the same bill, respondents 

were less likely to breakout charges for these two services. Numerous times the 

respondents indicated that they were paying a single price for a bundled (or combined) 

local and long distance service, and noted the single charge for both services.19 As a 

result, some respondents provided local and long distance detail, while others provided 

one value for both services. Overall, there were approximately 281 responses that give 

detail on local and long distance use and expenditures, while 399 responses are shown for 

the combination of both services. For most other questions, there were between 400 and 

450 responses. 

A. Overall Description of the Survey Population 

The survey provided information on employment size, use of telecommunications 

services and other characteristics of small business perceptions. Based on the sample 

population of the study, and the known distribution of businesses by employment size, 

most small businesses are very small, averaging less than 9 employees per business. In 

fact, 31% of small businesses reported having zero or one employee, and 47% of the 

respondents reported less than $200,000 in revenue in their latest year of operation. 

The sample included 449 responses from the District of Columbia and forty-eight states, 

absent Wyoming and Delaware. In total, 247 businesses (57%) indicated that their 

business was in a metropolitan area, while 185 businesses (43%) indicated that their 

business was outside of a metropolitan area.20 A total of 443 small businesses provided a 

response to the number of business locations (establishments). The average response was 

1.2 locations per business, with most firms reporting only one location. 

There appears to be a wide representation of industry groups, including construction 

(15%), retail and wholesale trade (21%), and services (40%) as the most numerous in the 

sample population. Within the service industry, the professional, scientific and 

 

19 Several telecommunications service providers have begun offering small business customers local 

telephone services and unlimited long distance calling for one price. Therefore, customers may not be able 

to distinguish the costs between these services. New bundling options are becoming available, including 

services such as Internet access and high-speed data services. 20 In the survey, the small business owner (or key official of the business) was asked to judge for 

themselves whether they considered their primary business location to be in a metropolitan area or not. 
8

professional industry accounted for 11% of all responses and about one-forth of 

responses from the service industry. Least numerous in the survey population are small 

businesses in the mining, utility and public administration industries. 

Employee size, as will be shown throughout this report, is a major explanatory variable 

for telecommunications expenditures. Based on the sample, the size of the average small 

business was 9.7 employees. However, the distribution in the sample exhibits a 

concentration of very small firms, with the median firm size of 3 employees and the 

mode of 1 employee. 

Firm size, as measured by employment size, varied by geography, usage, industry and 

other factors. The survey results show that small businesses located in metropolitan areas 

tend to be larger than small businesses located in non-metropolitan areas. In addition, as 

will be discussed later in this report, small businesses that use competitive local exchange 

carriers (CLECs) tend to be larger than small businesses that use incumbent local 

exchange carriers (ILECs). In fact, firm size is a defining characteristic among 

industries. Figure 1 (below) shows the average firm size by major industry grouping, 

called the North American Industry Classification System (NAICS). For these reasons, 

the average number of employees is an important factor in explaining variation in 

telecommunications consumption and will be referred to throughout this report. 

 

 

Figure 1: Average Employee Size for Major Industry 

 Employee 

Industry N Size 

Farming/Agriculture 10 0.60 

Construction 65 28.93 

Manufacturing 14 6.46 

Wholesale Trade 13 6.46 

Retail Trade 79 6.49 

Transportation and Warehousing 9 8.33 

Information Services 17 3.65 

Finance and Insurance 16 14.13 

Real Estate, Renting and Leasing 23 3.70 

Professional, Scientific and Technical 50 3.75 

Administration, Waste and Remediation 11 10.82 

Education, Entertainment and Pub. Admin. 20 12.63 

Health Care and Social Assistance 36 8.06 

Accommodation and Food Services 22 24.32 

Repair, Maint., Laundry and Personal Services 43 6.50 

All Industries 432 8.79 
9

B. Understanding the Composition of Telecommunications Spending 

This section reports survey results in terms of the composition of average expenditures 

for telecommunications services by small businesses. Telecommunications expenditures 

are composed of expenditures for local and long distance, wireless telephone, pager and 

beepers, high-speed cable modem, high-speed satellite, high-speed digital subscriber line 

(DSL), high-speed wireless, dedicated high-speed T-1 line, and other services. For each 

table presented in this section, the sum of average expenditures for all 

telecommunications services equals the total average telecommunications expenditures. 

One advantage of presenting the data in this way is that it permits the comparison of the 

relative size of spending for any telecommunications service to total spending for any 

subgroup or industry. Therefore, the data in this section will show total average 

expenditures and the composition (or makeup) of these expenditures. 

However, because some small businesses use certain telecommunications services and 

others do not, the composition of expenditures may not accurately report the average 

expenditures of small business users of a particular service. Instead, the composition of 

expenditures reflects service expenditures by all small businesses – users and nonusers. 

To adjust for this shortcoming, Section V will show the survey results only for small 

businesses using a particular telecommunications service. While Section V will provide 

a better understanding of users of a particular service, keep mind that the sum of the 

expenditures for telecommunications services will no longer equal total spending for a 

subgroup or industry, as it will in this section of the report. 

Figure 2 (shown on page 10) provides a summary of average spending for all firms in the 

survey and estimates the average expenditures for all firms surveyed to be $543.17 per 

month.21 In terms of the composition of expenditures, Figure 2 shows that local and long 

distance service expenditures (combined $307.43 per month) and wireless expenditures 

($176.44 per month) account for 89% of the total telecommunications services ($543.17 

per month) purchased by small businesses. Interestingly, average wireless expenditures 

($176.44 per month) exceed long distance expenditures ($150.47) for the small business 

market segment. Besides local, long distance and wireless telecommunications, the 

remaining share of expenditures for other telecommunications services represents a small 

part of the average total monthly expenditures, because these other services are not 

extensively used in the market. As previously mentioned, a discussion of the extent of 

telecommunications use (referred to as the penetration rate) will be explained in detail in 

Section V of this report. 

 

21 Please note that these results have a sufficiently high sample size for meeting the 95% level of 

confidence, as previously noted. 
10

Figure 2: Average Monthly Small Business Telecommunications Use 

All Firms 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 408 3.44 

 Expenditures 281 $ 179.93 

 

Long Distance (LD) Number of Lines 408 3.44 

 Expenditures 284 $ 150.47 

 

Local and LD Combined Number of Lines 408 3.44 

 Expenditures 399 $ 307.43 

 

Wireless Telephone Quantity Reported 397 2.39 

 Expenditures 407 $ 176.44 

 

Pager and Beepers Quantity Reported 420 0.26 

 Expenditures 423 $ 4.62 

 

Cable Modem Services Quantity Reported 418 0.36 

 Expenditures 393 $ 11.27 

 

Satellite (High-Speed) Quantity Reported 424 0.04 

 Expenditures 422 $ 2.10 

 

DSL Services Quantity Reported 422 0.24 

 Expenditures 399 $ 11.73 

 

Wireless Broadband Quantity Reported 423 0.04 

 Expenditures 419 $ 1.12 

 

Dial-Up Internet Services Quantity Reported 418 1.46 

 Expenditures 407 $ 11.51 

 

T-1 Services Quantity Reported 424 0.06 

 Expenditures 419 $ 16.03 

 

Other Services Expenditures 421 $ 0.91 

 

 

All Services Expenditures $ 543.17 
11

In order to understand more completely Figure 2, it is necessary to examine the details 

underlying these data. The relative importance of telecommunications services depends 

to a large extent upon detailed characteristics of the small business population. Indeed, 

there is a wide variance in spending based on various characteristics, such as employee 

size, revenue size and industry. Terms of employee size, details on telecommunications 

spending for small businesses are provided as Figures 3 through 5 and are shown on 

pages 12 through 14 of this section. 

 

Figure 3 shows that small firms, those with four or less employees, spend $256.25 per 

month, less than half as much as the average small business. Figure 3 also shows that 

some services are less commonly used than other services. For instance, the smallest of 

businesses do not use dedicated high-speed lines called T-1 lines. Because some 

broadband services have low market penetration rates, they have a relatively small share 

of total average monthly spending. On the other hand, local telephone services ($102.71 

per month), long distance services ($53.70 per month) and wireless services ($72.70 per 

month) are used by most small businesses and, therefore, make up most of the 

composition of spending for these small businesses. Also note that the sum of 

expenditures for local and long distance services exceeds the expenditures for the 

category combining these services. This is potentially an indication that small businesses 

are saving on service bundling, although other reasons, including sampling error, may 

explain these differences as well. 

As will become evident throughout this report, telecommunications spending increases 

with firm size, as measured by average employees per firm. As Figure 4 shows, as firm 

size increases, spending increases. Firms with 5 to nine employees spend $593.42 per 

month. As Figure 5 shows, spending increases even further to an average of $1,274.52 

per month for small businesses with 10 to 499 employees. In fact, as firm size increases, 

spending increasing for most telecommunications services. Looking back at Figure 3, 

Figure 4 and Figure 5, local telephone service, for example, increases from $102.71 per 

month for firms with four or less employees, to $208.65 per month for firms with five to 

nine employees, and increases even further to 396.82 per month for small businesses with 

more than 10 employees. Long distance and wireless spending also increases as the 

number of employees in the firm (its size) increases. For the larger sized businesses, 

firms with 10 to 499 employees, T1 Services account for the highest portion of 

broadband spending. 

However, in some instances, consumption does not increase necessarily with firm size. 

For instance, firms with 10 and 499 employees tend to spend less on cable modems and 

more on DSL and T1 services than firms with five to nine employees. This suggests that 

some services have a higher propensity to be consumed depending on the size of the firm. 

It may be that cable modem services, because they are widely available in residential 

areas, are more likely to be purchased by home-offices and non-employer businesses. 

This will be addressed in detail later in this report. 
12

Figure 3: Average Monthly Small Business Telecommunications Use

Firms with 0-4 Employees

 

 

 N All Firms

 

Local Telephone Services Number of Lines 230 1.97 

 Expenditures 167 $102.71 

 

Long Distance (LD) Number of Lines 230 1.97 

 Expenditures 170 $53.70 

 

Local and LD Combined Number of Lines 230 1.97 

 Expenditures 230 $153.20 

 

Wireless Telephone Quantity Reported 225 1.24 

 Expenditures 233 $72.70 

 

Pager and Beepers Quantity Reported 239 0.05 

 Expenditures 240 $0.98 

 

Cable Modem Services Quantity Reported 237 0.26 

 Expenditures 227 $9.07 

 

Satellite (High-Speed) Quantity Reported 240 0.03 

 Expenditures 239 $1.32 

 

DSL Services Quantity Reported 240 0.19 

 Expenditures 229 $7.27 

 

Wireless Broadband Quantity Reported 239 0.05 

 Expenditures 235 $0.77 

 

Dial-Up Internet Services Quantity Reported 235 0.44 

 Expenditures 233 $10.20 

 

T-1 Services Quantity Reported 239 0.01 

 Expenditures 238 $0.19 

 

Other Services Expenditures 239 $0.56 

 

All Services Expenditures $256.26 
13

Figure 4: Average Monthly Small Business Telecommunications Use

Firms with 5 - 9 Employees

 

 

 N All Firms

 

Local Telephone Services Number of Lines 75 3.95 

 Expenditures 52 $208.65 

 

Long Distance (LD) Number of Lines 75 3.95 

 Expenditures 52 $125.15 

 

Local and LD Combined Number of Lines 75 3.95 

 Expenditures 72 $344.96 

 

Wireless Telephone Quantity Reported 71 2.32 

 Expenditures 74 $180.61 

 

Pager and Beepers Quantity Reported 76 0.08 

 Expenditures 78 $4.07 

 

Cable Modem Services Quantity Reported 75 0.56 

 Expenditures 68 $18.53 

 

Satellite (High-Speed) Quantity Reported 77 0.06 

 Expenditures 77 $3.64 

 

DSL Services Quantity Reported 77 0.14 

 Expenditures 73 $8.48 

 

Wireless Broadband Quantity Reported 78 0.00 

 Expenditures 78 $0.00 

 

Dial-Up Internet Services Quantity Reported 78 0.49 

 Expenditures 76 $10.04 

 

T-1 Services Quantity Reported 78 0.12 

 Expenditures 77 $21.17 

 

Other Services Expenditures 78 $1.92 

 

All Services Expenditures $593.42 
14

Figure 5: Average Monthly Small Business Telecommunications Use

Firms with 10-499 Employees

 

 

N All Firms

 

Local Telephone Services Number of Lines 93 6.76 

 Expenditures 55 $396.82 

 

Long Distance (LD) Number of Lines 93 6.76 

 Expenditures 55 $476.24 

 

Local and LD Combined Number of Lines 93 6.76 

 Expenditures 87 $694.20 

 

Wireless Telephone Quantity Reported 91 5.31 

 Expenditures 89 $448.21 

 

Pager and Beepers Quantity Reported 94 0.95 

 Expenditures 94 $14.46 

 

Cable Modem Services Quantity Reported 95 0.47 

 Expenditures 88 $12.30 

 

Satellite (High-Speed) Quantity Reported 96 0.05 

 Expenditures 95 $3.05 

 

DSL Services Quantity Reported 94 0.47 

 Expenditures 86 $27.87 

 

Wireless Broadband Quantity Reported 95 0.07 

 Expenditures 95 $3.05 

 

Dial-Up Internet Services Quantity Reported 94 4.91 

 Expenditures 89 $16.12 

 

T-1 Services Quantity Reported 96 0.16 

 Expenditures 93 $54.19 

 

Other Services Expenditures 93 $1.08 

 

All Services Expenditures $1,274.52 
15

 

Another way to show the extent to which monthly telecommunications expenditures 

increase with size is to look at the size of small businesses in terms of their annual 

revenues. Figures 6 through 9 (shown on pages 16 through 19) provide details on the 

composition of telecommunications services spending by revenue size. For example, 

Figure 6 shows the smallest of firms, those with annual revenues of less than $200,000, 

as spending on average only $227.57 per month on telecommunications services. 

Comparing this result to Figure 3 (showing firms with 0-4 employees) shows that small 

firms spend less in total on telecommunications services. Consistent with previous 

figures shown in this report, local, long distance and wireless telecommunications 

services make up the bulk of the spending for these small businesses. As Figure 7

shows, small businesses with annual revenue between $200,000 and $1 million spend on 

average $477.03 per month. When looking at those small businesses with revenues 

between $1 and $5 million, as Figure 8 shows, as telecommunications spending increases 

further, reaching $1,130.80. 

Figure 9 shows the last largest category of small business revenue size, those firms with 

the highest telecommunications intensity. Small businesses with annual revenues greater 

than $5 million spend on average $2,748.55 per month. Compared to Figure 8, the 

increase is primarily the result of more long distance and wireless spending. Note that 

these larger firms spend on average $12.00 per month for cable modem service, 

indicating a low subscription level, while DSL services account for $47.14 per month, 

indicating a higher subscription level. Also be aware that the sample size for some of 

these subgroups is small, and caution should be used before drawing definitive 

conclusions. 

In general, Figures 6 through 9 show the same patterns as observed in Figures 3 though 

5 – namely, firms with fewer employees and firms with lower revenues tend to spend less 

on telecommunications services. In other words, as firm size increases, 

telecommunications spending increases. Clearly larger firms are more apt to spend more, 

in general, and spend more on certain services than others. As firm size increases, these 

firms are more likely to use more expensive services than smaller firms, such as toll-free 

services, yellow page ads and T-1 services. Very small firms, such as work-at-home 

businesses, may be able to avoid paying higher local telephone business rates and, 

overall, appear to spend less. In summary, bigger firms, both in terms of employee size 

and revenues, have more economic activity and, as a result, higher telecommunications 

needs. 
16

Figure 6: Average Monthly Small Business Telecommunications Use

Firms with Revenue Less Than $200,000

 

 

 N All Firms

 

Local Telephone Services Number of Lines 183 1.68 

 Expenditures 131 $88.02 

 

Long Distance (LD) Number of Lines 183 1.68 

 Expenditures 132 $42.58 

 

Local and LD Combined Number of Lines 183 1.68 

 Expenditures 184 $132.86 

 

Wireless Telephone Quantity Reported 183 1.08 

 Expenditures 187 $66.10 

 

Pager and Beepers Quantity Reported 191 0.06 

 Expenditures 192 $1.35 

 

Cable Modem Services Quantity Reported 190 0.28 

 Expenditures 177 $9.34 

 

Satellite (High-Speed) Quantity Reported 192 0.03 

 Expenditures 191 $0.79 

 

DSL Services Quantity Reported 191 0.15 

 Expenditures 185 $6.65 

 

Wireless Broadband Quantity Reported 192 0.06 

 Expenditures 187 $0.59 

 

Dial-Up Internet Services Quantity Reported 188 0.43 

 Expenditures 184 $9.61 

 

T-1 Services Quantity Reported 192 0.01 

 Expenditures 191 $0.24 

 

Other Services Expenditures 191 $0.05 

 

All Services Expenditures $227.57 
17

Figure 7: Average Monthly Small Business Telecommunications Use

Firms With Revenues Between $200,000 and $1 Million

 

 

 N All Firms

 

Local Telephone Services Number of Lines 134 3.42 

 Expenditures 91 $182.15 

 

Long Distance (LD) Number of Lines 134 3.42 

 Expenditures 92 $109.26 

 

Local and LD Combined Number of Lines 134 3.42 

 Expenditures 133 $296.75 

 

Wireless Telephone Quantity Reported 127 2.06 

 Expenditures 135 $135.61 

 

Pager and Beepers Quantity Reported 140 0.09 

 Expenditures 141 $1.83 

 

Cable Modem Services Quantity Reported 138 0.32 

 Expenditures 131 $10.45 

 

Satellite (High-Speed) Quantity Reported 141 0.05 

 Expenditures 140 $2.89 

 

DSL Services Quantity Reported 140 0.19 

 Expenditures 134 $7.93 

 

Wireless Broadband Quantity Reported 140 0.04 

 Expenditures 140 $0.79 

 

Dial-Up Internet Services Quantity Reported 139 0.52 

 Expenditures 138 $10.56 

 

T-1 Services Quantity Reported 140 0.04 

 Expenditures 139 $9.35 

 

Other Services Expenditures 141 $0.89 

 

All Services Expenditures $477.03 
18

Figure 8: Average Monthly Small Business Telecommunications Use

Firms with Revenues Between $1 Million and $5 Million

 

 

N All Firms

 

Local Telephone Services Number of Lines 67 6.39 

 Expenditures 44 $416.41 

 

Long Distance (LD) Number of Lines 67 6.39 

 Expenditures 45 $257.62 

 

Local and LD Combined Number of Lines 67 6.39 

 Expenditures 61 $586.93 

 

Wireless Telephone Quantity Reported 62 5.31 

 Expenditures 62 $408.47 

 

Pager and Beepers Quantity Reported 64 1.25 

 Expenditures 65 $20.94 

 

Cable Modem Services Quantity Reported 65 0.66 

 Expenditures 60 $17.40 

 

Satellite (High-Speed) Quantity Reported 66 0.06 

 Expenditures 66 $4.09 

 

DSL Services Quantity Reported 66 0.44 

 Expenditures 59 $28.78 

 

Wireless Broadband Quantity Reported 66 0.00 

 Expenditures 67 $1.79 

 

Dial-Up Internet Services Quantity Reported 66 6.62 

 Expenditures 61 $19.19 

 

T-1 Services Quantity Reported 67 0.10 

 Expenditures 66 $40.91 

 

Other Services Expenditures 65 $2.31 

 

All Services Expenditures $1,130.80 
19

Figure 9: Average Monthly Small Business Telecommunications Use

Firms With Revenues Greater Than $5 Million

 

 

N All Firms

 

Local Telephone Services Number of Lines 15 10.07 

 Expenditures 10 $356.00 

 

Long Distance (LD) Number of Lines 15 10.07 

 Expenditures 10 $1,513.00 

 

Local and LD Combined Number of Lines 15 10.07 

 Expenditures 14 $1,542.14 

 

Wireless Telephone Quantity Reported 15 8.33 

 Expenditures 15 $968.49 

 

Pager and Beepers Quantity Reported 15 0.33 

 Expenditures 15 $5.19 

 

Cable Modem Services Quantity Reported 15 0.27 

 Expenditures 15 $12.00 

 

Satellite (High-Speed) Quantity Reported 15 0.07 

 Expenditures 15 $4.00 

 

DSL Services Quantity Reported 15 0.80 

 Expenditures 14 $47.14 

 

Wireless Broadband Quantity Reported 15 0.07 

 Expenditures 15 $8.67 

 

Dial-Up Internet Services Quantity Reported 15 1.13 

 Expenditures 14 $17.79 

 

T-1 Services Quantity Reported 15 0.33 

 Expenditures 15 $136.00 

 

Other Services Expenditures 14 $7.14 

 

All Services Expenditures $2,748.55 
20

Analyzing average telecommunications spending for firms located in metropolitan versus 

non-metropolitan areas provides some interesting insights. Figure 10 and Figure 11 (on 

page 21 and 22) show that small businesses located non-metropolitan areas tend to spend 

less than those in metropolitan areas. Because firms in non-metropolitan areas are 

typically smaller than firms located in metropolitan areas, the difference in spending can 

be attributed, in part, to firm size. For example, based on the survey, 249 small 

businesses reported their primary business to be located in a metropolitan area and had, 

on average, 11.31 employees, while 185 businesses reported their primary business to be 

located in a non-metropolitan area and had, on average, 8.05 employees. The difference 

in employment explains to a large degree why metropolitan area businesses spend more 

on local, long distance and wireless services than do non-metropolitan area businesses. 

However, firm size may not explain all of the expenditure differences found between 

metropolitan and non-metropolitan areas. For instance, small businesses spend more on 

DSL services in metropolitan areas, but less in non-metropolitan areas, when compared 

with cable modem services. While the survey provides no insight into why the 

expenditures of high-speed services vary between geographic location, effects such as 

service availability, price, preferences and industry type may be among the contributing 

factors. 

Figure 12 and Figure 13 (on page 23 and 24) show differences in small business 

spending when the small business is served by a CLEC or the ILEC. In general, when 

ILECs serve small businesses, local telephone expenditures (as well as total spending) 

appear to be less ($520.31 per month) than when CLECs serve small businesses ($634.57 

per month). In fact, while ILEC-served small businesses pay less, based on a comparison 

of the number of lines in use, it appears that small businesses served by ILECs actually 

demand fewer lines as well. 

One explanation for why small businesses spend more for local services provided by 

CLECs than they do for local services provided by ILECs is that CLECs are serving 

somewhat larger firms than the ILECs serve. Based on the sample returns, ILECs served 

328 small businesses, while CLECs served 90 small businesses. On average, ILECs 

served small business with 8.50 employees per business, while CLECs served small 

businesses with 10.26 employees per business. In other words, CLECs are serving larger 

business customers, who, in turn, demand more services. This explains why small 

businesses spend less when ILECs serve them and more when CLECs serve them. 

Later, this report will explore differences in market penetration between 

telecommunications services and analyze data on only those small businesses that use a 

particular telecommunications service. First, however, the next section will provide a 

detailed analysis of the composition of telecommunications spending for major industry 

groups. 
21

Figure 10: Average Monthly Small Business Telecommunications Use

Firms Located in Non-Metropolitan Areas

 

 

 N All Firms

 

Local Telephone Services Number of Lines 173 2.76 

 Expenditures 123 $168.69 

 

Long Distance (LD) Number of Lines 173 2.76 

 Expenditures 125 $122.19 

 

Local and LD Combined Number of Lines 173 2.76 

 Expenditures 169 $282.98 

 

Wireless Telephone Quantity Reported 167 2.07 

 Expenditures 171 $147.48 

 

Pager and Beepers Quantity Reported 177 0.33 

 Expenditures 177 $7.04 

 

Cable Modem Services Quantity Reported 174 0.32 

 Expenditures 168 $12.60 

 

Satellite (High-Speed) Quantity Reported 178 0.06 

 Expenditures 176 $3.35 

 

DSL Services Quantity Reported 177 0.17 

 Expenditures 169 $8.43 

 

Wireless Broadband Quantity Reported 178 0.04 

 Expenditures 177 $0.62 

 

Dial-Up Internet Services Quantity Reported 177 2.71 

 Expenditures 171 $9.54 

 

T-1 Services Quantity Reported 178 0.04 

 Expenditures 177 $2.73 

 

Other Services Expenditures 177 $0.28 

 

All Services Expenditures $475.06 
22

Figure 11: Average Monthly Small Business Telecommunications Use

Firms Located in Metropolitan Areas

 

 

 N All Firms

 

Local Telephone Services Number of Lines 235 3.94 

 Expenditures 158 $188.67 

 

Long Distance (LD) Number of Lines 235 3.94 

 Expenditures 159 $172.70 

 

Local and LD Combined Number of Lines 235 3.94 

 Expenditures 230 $325.39 

 

Wireless Telephone Quantity Reported 230 2.62 

 Expenditures 236 $197.42 

 

Pager and Beepers Quantity Reported 243 0.21 

 Expenditures 246 $2.89 

 

Cable Modem Services Quantity Reported 244 0.39 

 Expenditures 225 $10.28 

 

Satellite (High-Speed) Quantity Reported 246 0.02 

 Expenditures 246 $1.20 

 

DSL Services Quantity Reported 245 0.29 

 Expenditures 230 $14.16 

 

Wireless Broadband Quantity Reported 245 0.04 

 Expenditures 242 $1.49 

 

Dial-Up Internet Services Quantity Reported 241 0.54 

 Expenditures 236 $12.94 

 

T-1 Services Quantity Reported 246 0.08 

 Expenditures 242 $25.75 

 

Other Services Expenditures 244 $1.37 

 

All Services Expenditures $592.89 
23

Figure 12: Average Monthly Small Business Telecommunications Use

Firms Served By A Local Telephone Competitor

 

 

 N All Firms

 

Local Telephone Services Number of Lines 86 4.53 

 Expenditures 56 $195.23 

 

Long Distance (LD) Number of Lines 86 4.53 

 Expenditures 58 $133.31 

 

Local and LD Combined Number of Lines 86 4.53 

 Expenditures 79 $368.89 

 

Wireless Telephone Quantity Reported 84 2.95 

 Expenditures 83 $190.78 

 

Pager and Beepers Quantity Reported 87 0.21 

 Expenditures 87 $3.16 

 

Cable Modem Services Quantity Reported 87 0.47 

 Expenditures 80 $10.26 

 

Satellite (High-Speed) Quantity Reported 88 0.02 

 Expenditures 87 $0.57 

 

DSL Services Quantity Reported 88 0.31 

 Expenditures 80 $15.45 

 

Wireless Broadband Quantity Reported 87 0.11 

 Expenditures 85 $1.88 

 

Dial-Up Internet Services Quantity Reported 86 0.44 

 Expenditures 81 $10.48 

 

T-1 Services Quantity Reported 88 0.11 

 Expenditures 86 $31.64 

 

Other Services Expenditures 86 $1.45 

 

All Services Expenditures $634.57 
24

Figure 13: Average Monthly Small Business Telecommunications Use

Firms Served By An Incumbent Local Telephone Company

 

 

 N All Firms

 

Local Telephone Services Number of Lines 322 3.14 

 Expenditures 225 $176.12 

 

Long Distance (LD) Number of Lines 322 3.14 

 Expenditures 226 $154.87 

 

Local and LD Combined Number of Lines 322 3.14 

 Expenditures 320 $292.25 

 

Wireless Telephone Quantity Reported 313 2.24 

 Expenditures 324 $172.76 

 

Pager and Beepers Quantity Reported 333 0.27 

 Expenditures 336 $5.00 

 

Cable Modem Services Quantity Reported 331 0.33 

 Expenditures 313 $11.53 

 

Satellite (High-Speed) Quantity Reported 336 0.04 

 Expenditures 335 $2.49 

 

DSL Services Quantity Reported 334 0.22 

 Expenditures 319 $10.80 

 

Wireless Broadband Quantity Reported 336 0.02 

 Expenditures 334 $0.93 

 

Dial-Up Internet Services Quantity Reported 332 1.72 

 Expenditures 326 $11.77 

 

T-1 Services Quantity Reported 336 0.05 

 Expenditures 333 $11.99 

 

Other Services Expenditures 335 $0.78 

 

All Services Expenditures $520.31 
25

C. Detailed Composition of Spending by Industry 

The previous section described the detailed composition of spending and how it varies by 

firm size, location to metropolitan area and local telephone provider. Another important 

factor influencing the consumption of telecommunications services by small businesses is 

the nature of the business – its industry. It is highly plausible that some industries require 

more telecommunications services than others in order to sell goods and services to their 

customers. This section will analyze how the composition of expenditures changes by 

industry and will be helpful in identifying telecommunication-intensive industries. 

Earlier, Figure 1 showed the distribution of employment size across various industry 

groups called NAICS. Figure 14 (below) shows the sample’s 458 respondents distributed 

across these same industry groups. In general, construction, trade (predominantly retail 

trade) and services were the most frequently reported industries in the survey. Within the 

service industry, the professional, scientific and professional industry accounted for 11% 

of all responses and about one-fourth of responses from the service industry. Mining and 

utilities were among the least identified, as was public administration, possibly because 

these firms may often contain a larger numbers of employees than would constitute a 

small business. 

Figure 14: Distribution of Respondents by Industry 

Using the North American Industry Classification System (NAICS) 

Industry NAICS Code N

 Agriculture, Forestry, Fishing and Hunting 11 10 

 Mining 21 1 

 Utilities 22 1 

 Construction 23 68 

 Manufacturing 31 14 

 Wholesale Trade 42 13 

 Retail Trade 44-45 84 

 Transportation and Warehousing 48-49 10 

 Information 51 17 

 Finance and Insurance 52 16 

 Real Estate and Rental and Leasing 53 23 

 Professional, Scientific and Technical Services 54 50 

 Management of Companies and Enterprises 55 0 

 Administrative, Waste Mgt. and Remediation 56 12 

 Educational Services 61 8 

 Health Care and Social Assistance 62 37 

 Arts, Entertainment and Recreation 71 8 

 Accommodation and Food Services 72 23 

 Repair, Maint., Laundry & Personal Services 81 44 

 Public Administration 92 5 

Other (not specified) N.A. 14

Total Number of Responses 458 
26

There are two minor differences with the classification of industries as reported in this 

report. The NAICS uses the term Other Services (except Public Administration), whereas 

Figure 14 (and the figures to follow) refers to this industry more descriptively as Repair, 

Maintenance, Laundry and Personal Services industry. Also, for the purpose of brevity, 

the educational services, health care and social assistance, and public administration 

industries are combined into a single industry, because the sample size for these three 

groups was very low. Except for these two differences, the terminology in this report is 

consistent with the NAICS terminology. 

As previously mentioned and shown in Figure 2, the average spending by small 

businesses was $543.17 per month. The composition of spending for specific industries 

shows a wide range of telecommunications needs for small businesses. Again, since 

these figures show the composition of spending by telecommunication service type, the 

sum of the services will equal the total spending for the average small business for any 

particular industry. The relative importance of any telecommunications service can be 

calculated by comparing its monthly spending to that of the total spending within the 

industry. 

Figure 15 (on page 27) shows the composition of monthly expenditures for the 

agriculture, forestry, fishing and hunting industry (labeled in the figure as Farming and 

Related). The figure shows that this industry is not an extensive user of 

telecommunications services. Local telephone services ($42.80 per month), long distance 

(76.20 per month) and wireless services ($90.86 per month) makeup the major expenses 

for this industry, which totals $196.61 per month. The sample size for this industry is 

low, indicating a very low level of confidence. As was the case in many of the earlier 

charts, the expenditures for the service category labeled Local and LD Combined is less 

than the sum of the expenditures for the separate categories labeled Local Telephone 

services and Long Distance, possibly reflecting the savings that small businesses receive 

on bundled services, although other explanations for these differences exist as well. 

Figure 16 (on page 28) shows the composition of monthly expenditures for the 

construction industry to be $683.91 per month, higher than the full sample average and 

much higher than the farming industry. What is particularly interesting about the 

construction industry is its high consumption of wireless services. Wireless services 

account for 56% of all telecommunications spending, exceeding local and long distance 

spending. 

As Figure 17 (on page 29) shows, the manufacturing industry has above average monthly 

consumption of telecommunications services, with total spending totaling $723.75. For 

the manufacturing industry, local, long distance and wireless telephone services are more 

even in terms of the level of expenditures, and the use of high-speed services is higher, 

compared with the construction industry. However, the sample size for this industry 

group is small. 
27

Figure 15: Average Monthly Small Business Telecommunications Use 

Firms in Farming and Related Industries

 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 8 1.63 

 Expenditures 5 $ 42.80 

 

Long Distance (LD) Number of Lines 8 1.63 

 Expenditures 5 $ 76.20 

 

Local and LD Combined Number of Lines 8 1.63 

 Expenditures 8 $ 91.25 

 

Wireless Telephone Quantity Reported 7 2.14 

 Expenditures 7 $ 90.86 

 

Pager and Beepers Quantity Reported 8 0 

 Expenditures 8 $ 0 

 

Cable Modem Services Quantity Reported 8 0.13 

 Expenditures 8 $ 4.38 

 

Satellite (High-Speed) Quantity Reported 8 0.25 

 Expenditures 8 $ 5.00 

 

DSL Services Quantity Reported 8 0 

 Expenditures 7 $ 0 

 

Wireless Broadband Quantity Reported 8 0 

 Expenditures 8 $ 0 

 

Dial-Up Internet Services Quantity Reported 8 0.25 

 Expenditures 8 $ 5.13 

 

T-1 Services Quantity Reported 8 0 

 Expenditures 8 $ 0 

 

Other Services Expenditures 8 $ 0 

 

 

All Services Expenditures $ 196.61 
28

Figure 16: Average Monthly Small Business Telecommunications Use 

Firms in the Construction Industry

 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 65 2.65 

 Expenditures 43 $ 210.14 

 

Long Distance (LD) Number of Lines 65 2.65 

 Expenditures 44 $ 69.20 

 

Local and LD Combined Number of Lines 65 2.65 

 Expenditures 63 $ 261.68 

 

Wireless Telephone Quantity Reported 63 4.70 

 Expenditures 64 $ 382.20 

 

Pager and Beepers Quantity Reported 65 0.60 

 Expenditures 65 $ 5.68 

 

Cable Modem Services Quantity Reported 66 0.26 

 Expenditures 59 $ 6.63 

 

Satellite (High-Speed) Quantity Reported 66 0.03 

 Expenditures 66 $ 1.97 

 

DSL Services Quantity Reported 65 0.29 

 Expenditures 63 $ 13.33 

 

Wireless Broadband Quantity Reported 66 0.02 

 Expenditures 65 $ 0 

 

Dial-Up Internet Services Quantity Reported 65 0.49 

 Expenditures 64 $ 12.42 

 

T-1 Services Quantity Reported 66 0.06 

 Expenditures 65 $ 0 

 

Other Services Expenditures 66 $ 0 

 

 

All Services Expenditures $ 683.91 
29

Figure 17: Average Monthly Small Business Telecommunications Use 

Firms in the Manufacturing Industry

 

 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 13 6.62 

 Expenditures 9 $ 163.33 

 

Long Distance (LD) Number of Lines 13 6.62 

 Expenditures 9 $ 207.22 

 

Local and LD Combined Number of Lines 13 6.62 

 Expenditures 12 $ 452.08 

 

Wireless Telephone Quantity Reported 12 2.50 

 Expenditures 13 $ 202.56 

 

Pager and Beepers Quantity Reported 13 0.31 

 Expenditures 13 $ 5.37 

 

Cable Modem Services Quantity Reported 13 0.15 

 Expenditures 12 $ 3.42 

 

Satellite (High-Speed) Quantity Reported 13 0.08 

 Expenditures 12 $ 0 

 

DSL Services Quantity Reported 13 0.46 

 Expenditures 11 $ 40.00 

 

Wireless Broadband Quantity Reported 13 0.08 

 Expenditures 13 $ 10.00 

 

Dial-Up Internet Services Quantity Reported 13 0.46 

 Expenditures 12 $ 7.25 

 

T-1 Services Quantity Reported 13 0.08 

 Expenditures 13 $ 3.07 

 

Other Services Expenditures 13 $ 0 

 

 

All Services Expenditures $ 723.75 
30

Figure 18 and Figure 19 (shown on pages 31 and 32) provide the composition of 

spending for the wholesale and retail industries, respectively. Based on the survey, small 

businesses operating in the wholesale industry spend approximately $786.09 per month, 

while the retail industry spends much less -- $383.31 per month. Figure 20 (on page 33) 

shows average spending for the transportation and warehousing industry ($701.21 per 

month) to be higher than the average small businesses. This industry appears to use 

wireless telephone services very extensively, accounting for 53% of all of its spending. 

Higher overall spending in the transportation and warehousing industry cannot be 

explained by employment size alone. 

The industries within the service-producing sector vary tremendously, as Figures 21 

through 29 (on pages 34 through 42) demonstrate. Average spending by small businesses 

in information services, finance and insurance, real estate (including renting and leasing), 

and administrative services (including waste and remediation) appears high, totaling 

$684.90, $1,803.99, $740.66 and 639.77 per month, respectively. These firms appear to 

be extensive users of telecommunications services. Compared to other industries, finance 

and insurance appears to be the most telecommunication-intensive industry of all, 

accounting for $1,211.67 per month for long distance services, as well as increased 

spending for high-speed data services. 

On the other hand, professional services, health care (including social assistance), food 

services, and personal services (including repair, maintenance and laundry services) all 

spend less than average, totaling $398.34, $422.99, $317.17 and $401.28 per month, 

respectively. The combined spending of the education, arts, entertainment and public 

administration services was $500.42 per month, just below the average for all industries 

($543.17 per month). As previously mentioned, industry results with small sample sizes 

cannot be depended upon for accuracy and are shown only to provide an understanding of 

the underlying data that makeup the survey results. 

Firm size is certainly a major factor explaining the differences in expenditures across 

industries. As Figure 1 showed earlier, firms in some industries tend to hire more 

employees. Because telecommunications spending has been shown to increase with the 

size of the firm, industries with a higher average employee size spend more on 

telecommunications. In fact, industries with a small average employment size, such as 

farming, retail trade and professional services, have low telecommunications 

expenditures on average. Likewise, industries that are typically larger in terms of 

employment, such as finance and manufacturing, have on average higher 

telecommunications expenditures. 

However, differences in expenditures between industries cannot be entirely explained by 

employee size alone. Differences in telecommunications expenditures are likely to be 

attributable to differences in the production and sales of goods and services between 

industries. For some industries, telecommunications services may be a vital input in the 

firm’s operations. As Figures 18 to 29 show, finance, real estate (which include renting 

and leasing) and wholesale trade businesses clearly require more telecommunications 

services than other businesses do, and more than can be explained solely by size. 
31

Figure 18: Average Monthly Small Business Telecommunications Use 

Firms in the Wholesale Trade Industry

 

 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 12 4.83 

 Expenditures 10 $ 229.50 

 

Long Distance (LD) Number of Lines 12 4.83 

 Expenditures 11 $ 259.55 

 

Local and LD Combined Number of Lines 12 4.83 

 Expenditures 11 $ 581.82 

 

Wireless Telephone Quantity Reported 12 1.83 

 Expenditures 13 $ 131.54 

 

Pager and Beepers Quantity Reported 13 0.08 

 Expenditures 13 $ 0.38 

 

Cable Modem Services Quantity Reported 13 1.00 

 Expenditures 12 $ 20.50 

 

Satellite (High-Speed) Quantity Reported 13 0 

 Expenditures 13 $ 0 

 

DSL Services Quantity Reported 13 0.38 

 Expenditures 11 $ 14.55 

 

Wireless Broadband Quantity Reported 13 0.08 

 Expenditures 12 $ 0 

 

Dial-Up Internet Services Quantity Reported 12 0.33 

 Expenditures 13 $ 14.23 

 

T-1 Services Quantity Reported 13 0.08 

 Expenditures 13 $ 23.08 

 

Other Services Expenditures 13 $ 0 

 

 

All Services Expenditures $ 786.09 

 
32

Figure 19: Average Monthly Small Business Telecommunications Use 

Firms in the Retail Trade Industry 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 76 3.18 

 Expenditures 50 $ 148.79 

 

Long Distance (LD) Number of Lines 76 3.18 

 Expenditures 51 $ 92.06 

 

Local and LD Combined Number of Lines 76 3.18 

 Expenditures 74 $ 215.71 

 

Wireless Telephone Quantity Reported 76 1.64 

 Expenditures 76 $ 137.87 

 

Pager and Beepers Quantity Reported 79 0.01 

 Expenditures 79 $ 0.08 

 

Cable Modem Services Quantity Reported 77 0.25 

 Expenditures 75 $ 6.44 

 

Satellite (High-Speed) Quantity Reported 78 0.06 

 Expenditures 79 $ 4.43 

 

DSL Services Quantity Reported 79 0.20 

 Expenditures 73 $ 7.30 

 

Wireless Broadband Quantity Reported 79 0 

 Expenditures 79 $ 0 

 

Dial-Up Internet Services Quantity Reported 77 0.48 

 Expenditures 74 $ 9.21 

 

T-1 Services Quantity Reported 79 0 

 Expenditures 79 $ 0 

 

Other Services Quantity Reported 77 0.03 

 Expenditures 77 $ 2.27 

 

All Services Expenditures $ 383.31 
33

Figure 20: Average Monthly Small Business Telecommunications Use 

Firms in the Transportation and Warehousing Industry 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 9 3.33 

 Expenditures 7 $ 179.97 

 

Long Distance (LD) Number of Lines 9 3.33 

 Expenditures 7 $ 176.14 

 

Local and LD Combined Number of Lines 9 3.33 

 Expenditures 9 $ 294.20 

 

Wireless Telephone Quantity Reported 9 6.56 

 Expenditures 9 $ 371.22 

 

Pager and Beepers Quantity Reported 10 0.10 

 Expenditures 10 $ 1.00 

 

Cable Modem Services Quantity Reported 10 0.30 

 Expenditures 10 $ 8.60 

 

Satellite (High-Speed) Quantity Reported 10 0.10 

 Expenditures 10 $ 10.00 

 

DSL Services Quantity Reported 10 0.20 

 Expenditures 10 $ 8.00 

 

Wireless Broadband Quantity Reported 10 0 

 Expenditures 10 $ 0 

 

Dial-Up Internet Services Quantity Reported 10 0.40 

 Expenditures 10 $ 8.20 

 

T-1 Services Quantity Reported 10 0 

 Expenditures 10 $ 0 

 

Other Services Expenditures 10 $ 0 

 

 

All Services Expenditures $ 701.21 
34

Figure 21: Average Monthly Small Business Telecommunications Use 

Firms in the Information Industry 

 

N All Firms

 

Local Telephone Services Number of Lines 17 2.65 

Expenditures 14 $ 181.64 

 

Long Distance (LD) Number of Lines 17 2.65 

Expenditures 14 $ 86.79 

 

Local and LD Combined Number of Lines 17 2.65 

Expenditures 15 $ 258.40 

 

Wireless Telephone Quantity Reported 16 2.44 

Expenditures 15 $ 243.33 

 

Pager and Beepers Quantity Reported 16 0 

Expenditures 17 $ 5.88 

 

Cable Modem Services Quantity Reported 17 0.59 

Expenditures 15 $ 24.67 

 

Satellite (High-Speed) Quantity Reported 17 0.06 

Expenditures 16 $ 0 

 

DSL Services Quantity Reported 17 0.35 

Expenditures 15 $ 13.27 

 

Wireless Broadband Quantity Reported 16 0.19 

Expenditures 15 $ 10.67 

 

Dial-Up Internet Services Quantity Reported 17 0.59 

Expenditures 16 $ 31.81 

 

T-1 Services Quantity Reported 16 0.06 

Expenditures 16 $ 96.88 

 

Other Services Expenditures 16 $ 0 

 

All Services Expenditures $ 684.90 
35

Figure 22: Average Monthly Small Business Telecommunications Use 

 Firms in the Finance and Insurance Industry

 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 11 6.36 

 Expenditures 9 $ 347.56 

 

Long Distance (LD) Number of Lines 11 6.36 

 Expenditures 9 $ 1,211.67 

 

Local and LD Combined Number of Lines 11 6.36 

 Expenditures 12 $ 1,243.25 

 

Wireless Telephone Quantity Reported 12 3.17 

 Expenditures 12 $ 255.00 

 

Pager and Beepers Quantity Reported 13 0.23 

 Expenditures 12 $ 1.42 

 

Cable Modem Services Quantity Reported 12 1.50 

 Expenditures 12 $ 41.17 

 

Satellite (High-Speed) Quantity Reported 13 0 

 Expenditures 13 $ 0 

 

DSL Services Quantity Reported 13 0.23 

 Expenditures 13 $ 11.15 

 

Wireless Broadband Quantity Reported 13 0 

 Expenditures 13 $ 0 

 

Dial-Up Internet Services Quantity Reported 13 32.00 

 Expenditures 12 $ 20.42 

 

T-1 Services Quantity Reported 13 0.62 

 Expenditures 12 $ 219.28 

 

Other Services Expenditures 13 $ 12.31 

 

 

All Services Expenditures $ 1,803.99 
36

Figure 23: Average Monthly Small Business Telecommunications Use 

Firms in the Real Estate, Renting and Leasing Industries

 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 22 5.14 

 Expenditures 15 $ 157.26 

 

Long Distance (LD) Number of Lines 22 5.14 

 Expenditures 15 $ 109.96 

 

Local and LD Combined Number of Lines 22 5.14 

 Expenditures 20 $ 482.67 

 

Wireless Telephone Quantity Reported 21 2.90 

 Expenditures 21 $ 176.82 

 

Pager and Beepers Quantity Reported 22 0.36 

 Expenditures 22 $ 7.84 

 

Cable Modem Services Quantity Reported 21 0.33 

 Expenditures 20 $ 10.25 

 

Satellite (High-Speed) Quantity Reported 22 0 

 Expenditures 22 $ 0 

 

DSL Services Quantity Reported 22 0.14 

 Expenditures 21 $ 3.33 

 

Wireless Broadband Quantity Reported 21 0.43 

 Expenditures 20 $ 5.50 

 

Dial-Up Internet Services Quantity Reported 21 0.48 

 Expenditures 22 $ 11.06 

 

T-1 Services Quantity Reported 22 0.14 

 Expenditures 22 $ 40.91 

 

Other Services Expenditures 22 $ 2.27 

 

 

All Services Expenditures $ 740.66 
37

Figure 24: Average Monthly Small Business Telecommunications Use 

Firms in the Professional, Scientific and Technical Industries

 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 48 3.04 

 Expenditures 40 $ 144.25 

 

Long Distance (LD) Number of Lines 48 3.04 

 Expenditures 40 $ 116.83 

 

Local and LD Combined Number of Lines 48 3.04 

 Expenditures 48 $ 247.04 

 

Wireless Telephone Quantity Reported 46 1.65 

 Expenditures 48 $ 100.67 

 

Pager and Beepers Quantity Reported 50 0.04 

 Expenditures 50 $ 1.12 

 

Cable Modem Services Quantity Reported 49 0.29 

 Expenditures 47 $ 11.18 

 

Satellite (High-Speed) Quantity Reported 50 0.02 

 Expenditures 50 $ 1.50 

 

DSL Services Quantity Reported 49 0.31 

 Expenditures 48 $ 15.31 

 

Wireless Broadband Quantity Reported 50 0.04 

 Expenditures 50 $ 1.00 

 

Dial-Up Internet Services Quantity Reported 49 0.59 

 Expenditures 49 $ 11.46 

 

T-1 Services Quantity Reported 50 0.08 

 Expenditures 49 $ 9.06 

 

Other Services Expenditures 49 $ 0 

 

 

All Services Expenditures $ 398.34 
38

Figure 25: Average Monthly Small Business Telecommunications Use 

Firms in the Administrative, Waste Mgt. And Remediation Industries 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 9 3.00 

 Expenditures 9 $ 242.44 

 

Long Distance (LD) Number of Lines 9 3.00 

 Expenditures 9 $ 246.89 

 

Local and LD Combined Number of Lines 9 3.00 

 Expenditures 11 $ 418.09 

 

Wireless Telephone Quantity Reported 9 1.78 

 Expenditures 10 $ 137.00 

 

Pager and Beepers Quantity Reported 11 0.09 

 Expenditures 11 $ 1.23 

 

Cable Modem Services Quantity Reported 11 0.73 

 Expenditures 11 $ 16.64 

 

Satellite (High-Speed) Quantity Reported 11 0 

 Expenditures 11 $ 0 

 

DSL Services Quantity Reported 10 0 

 Expenditures 11 $ 6.81 

 

Wireless Broadband Quantity Reported 11 0 

 Expenditures 11 $ 0 

 

Dial-Up Internet Services Quantity Reported 11 0.36 

 Expenditures 11 $ 14.55 

 

T-1 Services Quantity Reported 11 0.09 

 Expenditures 11 $ 45.45 

 

Other Services Quantity Reported 11 0 

 Expenditures 11 $ 0 

 

All Services Expenditures $ 639.77 
39

Figure 26: Average Monthly Small Business Telecommunications Use 

Firms in the Health Care and Social Assistance Industries 

 

 

N All Firms

 

Local Telephone Services Number of Lines 35 3.26 

 Expenditures 18 $ 258.33 

 

Long Distance (LD) Number of Lines 35 3.26 

 Expenditures 18 $ 148.17 

 

Local and LD Combined Number of Lines 35 3.26 

 Expenditures 32 $ 315.97 

 

Wireless Telephone Quantity Reported 32 1.03 

 Expenditures 34 $ 71.41 

 

Pager and Beepers Quantity Reported 34 0.06 

 Expenditures 35 $ 6.06 

 

Cable Modem Services Quantity Reported 34 0.24 

 Expenditures 32 $ 10.12 

 

Satellite (High-Speed) Quantity Reported 35 0.06 

 Expenditures 34 $ 1.76 

 

DSL Services Quantity Reported 35 0.17 

 Expenditures 33 $ 11.64 

 

Wireless Broadband Quantity Reported 35 0 

 Expenditures 35 $ 0 

 

Dial-Up Internet Services Quantity Reported 35 0.34 

 Expenditures 34 $ 6.03 

 

T-1 Services Quantity Reported 35 0 

 Expenditures 35 $ 0 

 

Other Services Expenditures 35 $ 0 

 

 

All Services Expenditures $ 422.99 
40

Figure 27: Average Monthly Small Business Telecommunications Use 

Firms in the Accommodation and Food Services Industries 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 21 3.33 

 Expenditures 10 $ 169.00 

 

Long Distance (LD) Number of Lines 21 3.33 

 Expenditures 10 $ 77.60 

 

Local and LD Combined Number of Lines 21 3.33 

 Expenditures 20 $ 212.55 

 

Wireless Telephone Quantity Reported 22 1.27 

 Expenditures 21 $ 72.29 

 

Pager and Beepers Quantity Reported 22 0 

 Expenditures 22 $ 0 

 

Cable Modem Services Quantity Reported 21 0.43 

 Expenditures 20 $ 17.75 

 

Satellite (High-Speed) Quantity Reported 22 0.05 

 Expenditures 22 $ 1.36 

 

DSL Services Quantity Reported 22 0.18 

 Expenditures 21 $ 3.86 

 

Wireless Broadband Quantity Reported 22 0.05 

 Expenditures 22 $ 0.91 

 

Dial-Up Internet Services Quantity Reported 21 0.43 

 Expenditures 20 $ 8.45 

 

T-1 Services Quantity Reported 22 0 

 Expenditures 22 $ 0 

 

Other Services Expenditures 22 $ 0 

 

 

All Services Expenditures $ 317.17 
41

Figure 28: Average Monthly Small Business Telecommunications Use 

Firms in the Repair, Maint., Laundry & Personal Services 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 41 2.66 

 Expenditures 27 $ 135.89 

 

Long Distance (LD) Number of Lines 41 2.66 

 Expenditures 27 $ 110.20 

 

Local and LD Combined Number of Lines 41 2.66 

 Expenditures 43 $ 234.97 

 

Wireless Telephone Quantity Reported 40 1.53 

 Expenditures 43 $ 128.35 

 

Pager and Beepers Quantity Reported 42 0 

 Expenditures 43 $ 0.58 

 

Cable Modem Services Quantity Reported 43 0.30 

 Expenditures 39 $ 8.49 

 

Satellite (High-Speed) Quantity Reported 43 0 

 Expenditures 43 $ 0 

 

DSL Services Quantity Reported 43 0.19 

 Expenditures 41 $ 10.00 

 

Wireless Broadband Quantity Reported 43 0 

 Expenditures 43 $ 0 

 

Dial-Up Internet Services Quantity Reported 43 0.51 

 Expenditures 42 $ 10.76 

 

T-1 Services Quantity Reported 43 0.02 

 Expenditures 43 $ 8.14 

 

Other Services Expenditures 43 $ 0 

 

 

All Services Expenditures $ 401.28 

 
42

Figure 29: Average Monthly Small Business Telecommunications Use 

Firms in the Education, Arts, Entertainment and Public Administration 

 

 

 N All Firms

 

Local Telephone Services Number of Lines 18 4.72 

 Expenditures 13 $ 190.08 

 

Long Distance (LD) Number of Lines 18 4.72 

 Expenditures 13 $ 113.46 

 

Local and LD Combined Number of Lines 18 4.72 

 Expenditures 17 $ 273.76 

 

Wireless Telephone Quantity Reported 17 2.76 

 Expenditures 17 $ 130.00 

 

Pager and Beepers Quantity Reported 19 2.37 

 Expenditures 19 $ 42.11 

 

Cable Modem Services Quantity Reported 19 0.47 

 Expenditures 17 $ 21.24 

 

Satellite (High-Speed) Quantity Reported 19 0.05 

 Expenditures 19 $ 5.26 

 

DSL Services Quantity Reported 19 0.26 

 Expenditures 17 $ 11.18 

 

Wireless Broadband Quantity Reported 19 0 

 Expenditures 19 $ 0 

 

Dial-Up Internet Services Quantity Reported 19 0.68 

 Expenditures 16 $ 16.88 

 

T-1 Services Quantity Reported 19 0.11 

 Expenditures 17 $ 0 

 

Other Services Expenditures 19 $ 0 

 

 

All Services Expenditures $ 500.42 
43

Using all of the survey responses, Section IV has analyzed the composition of 

telecommunications expenditures for major industries and identified industries that spend 

extensive amounts for telecommunications services. Appendix B recompiles Figures 15 

to 29 and compares industry expenditures for each telecommunications service. The 

section to follow will make similar analyses, but focus only the subset of firms 

subscribing to specific telecommunications services. 

V. Market Penetration and Usage 

Until now, this report has provided results showing the composition of spending by the 

small business market segment in terms of various characteristics, such as business size 

and industry classification. While these reports are useful in showing the total spending 

of small businesses and the relative importance of telecommunications services for these 

various characteristics, these tables do not reveal the spending patterns of only those 

small businesses subscribing to and paying for a particular telecommunication service. 

For example, according to the sample results, most small businesses subscribe to local 

and long distance services (390 firms), while only a dozen firms actually subscribe to T-1 

services. As a result, T-1 service has a relatively small share of spending in the overall 

small business segment. However, for those small businesses using the service, T-1 

spending represents a major purchase and a considerable part of their telecommunications 

needs. For this reason, this section is devoted to understanding the telecommunications 

use and expenditures for only those small businesses that subscribe to a particular service. 

Unlike the analysis of composition of expenditures, however, the telecommunications 

services listed in the tables cannot be summed to an industry or subgroup total. 

A. Telecommunications Services Penetration Rates 

A common way of understanding the degree to which small businesses utilize 

telecommunications services is to measure the services penetration rate. For any 

particular service, the service penetration rate is measured as the ratio of the number of 

subscribing firms to the total number of firms in the population. Because survey 

participants identified which services they use, how much they use and how much they 

spend, results from the survey can be used to calculate penetration rates for each 

telecommunications service. 

Wired telephone services, specifically local telephone services, are used by 98% of small 

business, a figure slightly higher than the 96% penetration in the residential market.22 

Wireless telephone services are used by 73% of small businesses, a rather interesting 

statistic for a service that was first introduced to the market only twenty years ago. 

However, pagers are used by only 6% of small businesses, and may have become a 

casualty of wireless telephony’s success. 

 

22 “Telephone Subscribership in the United States,” Industry Analysis and Technology Division, FCC, 

November 2002, Table 1, p. 5. The data for March 3003 was 95.5. 
44

As for Internet and data services, overall, the penetration rates for these services are much 

lower than traditional wired telephone and wireless telephone services. According to the 

sample results, Internet dialup services are used by 38% of the small businesses survey. 

High-speed services are led by cable modem services (26%) and by Digital Subscriber 

Line (DSL) services (21%). Other high-speed alternatives, satellite (4%) and wireless 

broadband (3%) have very low penetration rates. T-1 data services are more popular with 

larger businesses, and, therefore, are only subscribed to by 4% of the small businesses in 

the survey. In summary, Internet services, particularly high-speed services, are not 

widely used by small businesses, for reasons not explicitly clear from the survey results. 

The possible reasons for these low service penetration rates may be due to price, 

consumer preferences, service availability and the nature of the small business. Figure 

30 (below) summarizes the penetration rates for major telecommunications services and 

indicates a substantial variation in penetration rates across telecommunications services. 

 

 Figure 30: Penetration Rates for Telecommunications 

 Services Used by Small Businesses 

Service N Users Only Penetration Rate

Wired Telephone 408 399 98% 

Wireless Telephone 397 299 73% 

Pagers 420 27 6% 

Cable Modems 418 109 26% 

Satellite 424 16 4% 

DSL 422 87 21% 

Wireless Broadband 423 12 3% 

Dial-Up Internet Access 418 158 38% 

T-1 424 17 4% 

B. Expenditures of Users of Telecommunications Services 

Section IV of this report averages data across all small businesses in the survey, whether 

these businesses subscribe to a telecommunications service or not. Because of the large 

differences in penetration rates between services, eliminating those businesses that do not 

use a particular telecommunications service can provide some interesting insights into the 

expenditures for telecommunications by small business subscribers (labeled in Figure 30

as users only). 

For example, Figure 31 (on page 45) shows the results of only those firms subscribing a 

telecommunications service, and indicates that wireless services ($239.37 per month) are 

the single biggest expense for small businesses, followed by local telephone ($185.88 per 

month) and long distance services ($155.39 per month). Small business subscribers pay 
45

about twice as much for high-speed services than they do for dialup services. Among the 

high-speed services, cable modem service expenditures are less, which may reflect lower 

priced cable modem services and explain, in part, why these penetration rates are higher 

than other services. This point will be investigated further in the next section, which 

analyzes telecommunications service prices using a measure of expenditures per unit. 

Figure 31: Average Monthly Expenditure of Small Businesses

That Use and Pay For a Specific Telecommunications Service 

 

 Only Firms 

Service N Using Services

 

Local Telephone Services 272 $ 185.88 

 

Long Distance Services 275 $ 155.39 

 

Local and Long distance (Added) 275 $ 341.27 

 

Local and Long distance (Combined) 390 $ 314.52 

 

Mobile (Wireless and PCS) 300 $ 239.37 

 

Pager and Beepers 30 $ 65.20 

 

Cable Modem Services 83 $ 53.38 

 

Satellite (High-speed) 13 $ 68.07 

 

DSL Services 69 $ 67.84 

 

Wireless Broadband 8 $ 58.75 

Dial-up Internet Services 147 $ 31.88 

 

T-1 Services 12 $ 559.61 

 

Other Services 4 $ 77.00 

 
46

Figure 32 (on page 47) shows the average expenditures and quantities used by small 

businesses with less than four employees that subscribe to telecommunications services. 

For example, 223 small businesses had less than four employees and reported using local 

and long distance services. On average, these businesses reported using two lines and 

spent $158.01 per month for both services. For these very small businesses, wireless 

service spending averages $102.65 per month, an amount greater than spending for long 

distance services ($56.01 per month). 

As for larger-sized small businesses, ones with 5 to 9 employees and ones with 10 to 499 

employees, Figures 33 and 34 (on pages 48-49) show average expenditures and demand 

for only firms that use particular telecommunications services. Like Figures 3 through 

5, Figures 33 and 34 show that telecommunications expenditures increase with firm size. 

Larger firms tend to use broadband service, including T-1 services. As firm size 

increases, DSL spending increases, but the quantity of cable modems in use remains high. 

This may reflect, in part, the fact that DSL services are being priced higher than cable 

modem services in the small business market. This point will be investigated further, but 

later in this report. Figure 34 also shows that small businesses reporting local and long 

distance spending separately pay much more than the combination of these services, an 

indication of the savings accrued to larger firms who bundle telecommunications 

services. Other factors may also influence this result, such as sampling differences, 

underreporting and sampling error. 

Figures 35 through 38 (on pages 50-53) show, once again, that as the revenue size 

increases, so does the consumption of telecommunications services. Again, these figures 

reflect expenditures and use for only those small businesses subscribing to a particular 

service. Because the sample size for some reporting subgroups are quite low, and, while 

informative about the makeup of the sample, provide a low level of confidence about the 

population at large. 

Figures 39 and 40 (on pages 54-55) show the expenditures of small businesses (that 

subscribe to telephone services) located in metropolitan and non-metropolitan areas. 

Comparing these two figures, it appears that metropolitan-based businesses spend more 

on traditional telecommunications services, such as local and long distance, but less on 

other services, such as beeper and pagers, as well as some high-speed data services. 

However, businesses located in non-metropolitan areas use fewer telephone lines in 

service, an indication that non-metropolitan businesses are smaller in general. 

Metropolitan-based businesses used more telephone lines and, accordingly, spend more 

for traditional telephone services. They also spend more on dial-up Internet access and 

T-1 services, because, as concluded earlier in this report, small businesses in metropolitan 

areas tend to be larger than those in non-metropolitan areas. 
47

 Figure 32: Average Monthly Small Business Telecommunications Use

 Firms with 0-4 Employees

 

Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 223 2.03 

 Expenditures 160 $107.20 

 

Long Distance (LD) Number of Lines 223 2.03 

 Expenditures 163 $56.01 

 

Local and LD Combined Number of Lines 223 2.03 

 Expenditures 223 $158.01 

 

Wireless Telephone Quantity Reported 157 1.78 

 Expenditures 165 $102.66 

 

Pager and Beepers Quantity Reported 9 1.33 

 Expenditures 10 $23.60 

 

Cable Modem Services Quantity Reported 57 1.09 

 Expenditures 45 $45.74 

 

Satellite (High-Speed) Quantity Reported 6 1.17 

 Expenditures 5 $62.99 

 

DSL Services Quantity Reported 43 1.05 

 Expenditures 35 $47.57 

 

Wireless Broadband Quantity Reported 8 1.38 

 Expenditures 4 $45.00 

 

Dial-Up Internet Services Quantity Reported 87 1.20 

 Expenditures 85 $27.96 

 

T-1 Services Quantity Reported 2 1.00 

 Expenditures 1 $45.00 

 

Other Services Expenditures 2 $67.50 
48

 Figure 33: Average Monthly Small Business Telecommunications Use

 Firms with 5 - 9 Employees

 # Served Only Firms Using Services

Local Telephone 

Services 

Number of 

Lines 74 4.00 

 Expenditures 51 $212.74 

 

Long Distance (LD) 

Number of 

Lines 74 4.00 

 Expenditures 51 $127.60 

 

Local and LD 

Combined 

Number of 

Lines 74 4.00 

 Expenditures 71 $349.82 

 

Wireless Telephone

Quantity 

Reported 50 3.30 

 Expenditures 53 $252.17 

 

Pager and Beepers 

Quantity 

Reported 5 1.20 

 Expenditures 7 $45.35 

 

Cable Modem 

Services 

Quantity 

Reported 24 1.75 

 Expenditures 18 $69.99 

 

Satellite (HighSpeed) 

Quantity 

Reported 5 1.00 

 Expenditures 4 $70.00 

 

DSL Services 

Quantity 

Reported 11 1.00 

 Expenditures 9 $68.78 

 

Wireless 

Broadband 

Quantity 

Reported 0 0 

 Expenditures 0 $0.00 

 

Dial-Up Internet 

Services 

Quantity 

Reported 31 1.23 

 Expenditures 29 $26.32 

 

T-1 Services 

Quantity 

Reported 5 1.80 

 Expenditures 4 $407.58 

 

Other Services Expenditures 1 $150.00 
49

 Figure 34: Average Monthly Small Business Telecommunications Use

 Firms with 10-499 Employees

 # Served Only Firms Using Services

 

Local Telephone Services Number of Lines 93 6.76 

 Expenditures 55 $396.82 

 

Long Distance (LD) Number of Lines 93 6.76 

 Expenditures 55 $476.24 

 

Local and LD Combined Number of Lines 93 6.76 

 Expenditures 87 $694.20 

 

Wireless Telephone Quantity Reported 75 6.44 

 Expenditures 73 $546.44 

 

Pager and Beepers Quantity Reported 11 8.09 

 Expenditures 11 $123.54 

 

Cable Modem Services Quantity Reported 26 1.73 

 Expenditures 19 $56.95 

 

Satellite (High-Speed) Quantity Reported 5 1.00 

 Expenditures 4 $72.50 

 

DSL Services Quantity Reported 33 1.33 

 Expenditures 25 $95.88 

 

Wireless Broadband Quantity Reported 4 1.75 

 Expenditures 4 $72.50 

 

Dial-Up Internet Services Quantity Reported 34 13.59 

 Expenditures 29 $49.47 

 

T-1 Services Quantity Reported 10 1.50 

 Expenditures 7 $719.99 

 

Other Services Expenditures 3 $50.00 

 
50

 Figure 35: Average Monthly Small Business Telecommunications Use 

 Firms with Revenue Less Than $200,000 

 

 Only Firms 

 # Served Using Services

 

Local Telephone 

Services Number of Lines 177 1.74 

 Expenditures 125 $92.25 

 

Long Distance (LD) Number of Lines 177 1.74 

 Expenditures 126 $44.60 

 

Local and LD Combined Number of Lines 177 1.74 

 Expenditures 178 $137.34 

 

Wireless Telephone Quantity Reported 118 1.67 

 Expenditures 122 $101.31 

 

Pager and Beepers Quantity Reported 8 1.38 

 Expenditures 9 $28.83 

 

Cable Modem Services Quantity Reported 50 1.08 

 Expenditures 37 $44.69 

 

Satellite (High-Speed) Quantity Reported 4 1.25 

 Expenditures 3 $50.00 

 

DSL Services Quantity Reported 27 1.07 

 Expenditures 23 $53.48 

 

Wireless Broadband Quantity Reported 8 1.38 

 Expenditures 3 $36.67 

 

Dial-Up Internet Services Quantity Reported 72 1.13 

 Expenditures 68 $26.01 

 

T-1 Services Quantity Reported 2 1.00 

 Expenditures 1 $45.00 

 

Other Services Expenditures 1 $10.00 
51

 Figure 36: Average Monthly Small Business Telecommunications Use

 Firms With Revenues Between $200,000 and $1 Million

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 133 3.44 

 Expenditures 90 $184.18 

 

Long Distance (LD) Number of Lines 133 3.44 

 Expenditures 91 $110.46 

 

Local and LD Combined Number of Lines 133 3.44 

 Expenditures 132 $298.99 

 

Wireless Telephone Quantity Reported 95 2.76 

 Expenditures 103 $177.74 

 

Pager and Beepers Quantity Reported 10 1.30 

 Expenditures 11 $23.40 

 

Cable Modem Services Quantity Reported 34 1.29 

 Expenditures 26 $52.65 

 

Satellite (High-Speed) Quantity Reported 7 1.00 

 Expenditures 6 $67.49 

 

DSL Services Quantity Reported 27 1.00 

 Expenditures 22 $48.31 

 

Wireless Broadband Quantity Reported 3 2.00 

 Expenditures 3 $36.67 

 

Dial-Up Internet Services Quantity Reported 56 1.29 

 Expenditures 55 $26.49 

 

T-1 Services Quantity Reported 5 1.20 

 Expenditures 4 $324.75 

 

Other Services Expenditures 1 $125.00 
52

 Figure 37: Average Monthly Small Business Telecommunications Use

 Firms With Revenues Between $1 Million and $5 Million

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 66 6.48 

 Expenditures 43 $426.09 

 

Long Distance (LD) Number of Lines 66 6.48 

 Expenditures 44 $263.48 

 

Local and LD Combined Number of Lines 66 6.48 

 Expenditures 60 $596.71 

 

Wireless Telephone Quantity Reported 54 6.09 

 Expenditures 54 $468.98 

 

Pager and Beepers Quantity Reported 6 13.33 

 Expenditures 7 $194.45 

 

Cable Modem Services Quantity Reported 20 2.15 

 Expenditures 15 $69.60 

 

Satellite (High-Speed) Quantity Reported 4 1.00 

 Expenditures 3 $90.00 

 

DSL Services Quantity Reported 24 1.21 

 Expenditures 17 $99.88 

 

Wireless Broadband Quantity Reported 0 0 ∗

 Expenditures 1 $120.00 

 

Dial-Up Internet Services Quantity Reported 23 19.00 

 Expenditures 18 $65.04 

 

T-1 Services Quantity Reported 5 1.40 

 Expenditures 4 $675.00 

 

Other Services Expenditures 1 $150.00 

 

∗

 This is an example of where a respondent provided information on wireless expenditures but failed to note 

the number of wireless phones in use. 
53

 Figure 38: Average Monthly Small Business Telecommunications Use

 Firms With Revenues Greater Than $5 Million

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 15 10.07 

 Expenditures 10 $356.00 

 

Long Distance (LD) Number of Lines 15 10.07 

 Expenditures 10 $1,513.00 

 

Local and LD Combined Number of Lines 15 10.07 

 Expenditures 14 $1,542.14 

 

Wireless Telephone Quantity Reported 15 8.33 

 Expenditures 15 $968.49 

 

Pager and Beepers Quantity Reported 3 1.67 

 Expenditures 3 $25.94 

 

Cable Modem Services Quantity Reported 3 1.33 

 Expenditures 3 $60.00 

 

Satellite (High-Speed) Quantity Reported 1 1.00 

 Expenditures 1 $60.00 

 

DSL Services Quantity Reported 7 1.71 

 Expenditures 6 $110.00 

 

Wireless Broadband Quantity Reported 1 1.00 

 Expenditures 1 $130.00 

 

Dial-Up Internet Services Quantity Reported 4 4.25 

 Expenditures 3 $83.00 

 

T-1 Services Quantity Reported 2 2.50 

 Expenditures 2 $1,019.98 

 

Other Services Expenditures 3 $50.00 
54

 Figure 39: Average Monthly Small Business Telecommunications Use

 Firms Located in Non-Metropolitan Areas

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 172 2.77 

 Expenditures 122 $170.07 

 

Long Distance (LD) Number of Lines 172 2.77 

 Expenditures 124 $123.17 

 

Local and LD Combined Number of Lines 172 2.77 

 Expenditures 168 $284.67 

 

Wireless Telephone Quantity Reported 123 2.80 

 Expenditures 127 $198.57 

 

Pager and Beepers Quantity Reported 11 5.36 

 Expenditures 11 $113.23 

 

Cable Modem Services Quantity Reported 43 1.28 

 Expenditures 35 $60.48 

 

Satellite (High-Speed) Quantity Reported 10 1.10 

 Expenditures 8 $73.74 

 

DSL Services Quantity Reported 26 1.15 

 Expenditures 20 $71.25 

 

Wireless Broadband Quantity Reported 5 1.60 

 Expenditures 4 $27.50 

 

Dial-Up Internet Services Quantity Reported 66 7.26 

 Expenditures 60 $27.19 

 

T-1 Services Quantity Reported 5 1.40 

 Expenditures 4 120.99 

 

Other Services Expenditures 1 50.00 
55

 Figure 40: Average Monthly Small Business Telecommunications Use

 Firms Located in Metropolitan Areas

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 227 4.07 

 Expenditures 150 $198.74 

 

Long Distance (LD) Number of Lines 227 4.07 

 Expenditures 151 $181.85 

 

Local and LD Combined Number of Lines 227 4.07 

 Expenditures 222 $337.12 

 

Wireless Telephone Quantity Reported 167 3.61 

 Expenditures 173 $269.31 

 

Pager and Beepers Quantity Reported 16 3.13 

 Expenditures 19 $37.39 

 

Cable Modem Services Quantity Reported 66 1.45 

 Expenditures 48 $48.20 

 

Satellite (High-Speed) Quantity Reported 6 1.00 

 Expenditures 5 $59.00 

 

DSL Services Quantity Reported 61 1.15 

 Expenditures 49 $66.44 

 

Wireless Broadband Quantity Reported 7 1.43 

 Expenditures 4 $90.00 

 

Dial-Up Internet Services Quantity Reported 92 1.42 

 Expenditures 87 $35.11 

 

T-1 Services Quantity Reported 12 1.58 

 Expenditures 8 $778.92 

 

Other Services Expenditures 3 $83.75 
56

The survey questionnaire asked small businesses to identify whether a CLEC or ILEC 

provided their local telecommunications services. Based on the responses of 

telecommunication service users, a comparison of average expenditures was made. 

Figures 41 and 42 (on pages 57 and 58) compare expenditures and use for those small 

businesses served by CLECs and ILECs, respectively. While small businesses that use 

CLECs as their local telecommunications provider tend to pay more than small 

businesses that use ILECs as their local telecommunications provider, they also tend to 

demand a higher quantity of service. For example small businesses that use a CLEC 

spend $383.45 per month for local and long distance services, but use on average 4.7 

lines per business. In contrast, small businesses that use an ILEC spend only $236.18, 

but use on average 3.2 lines per business. From this and from the earlier analysis on the 

composition of expenditures, CLECs appear to be serving (on average) more 

telecommunication-intensive firms and larger sized firms than their ILEC counterparts. 

Later in this report (in Section VII) the market share of CLECs will be analyzed. 

In summary, many small businesses do not subscribe to the full range of 

telecommunications services. Some services, such as local telephone services are used 

by 98% of small business firms, while other services, such paging and beepers are used 

by only 6% of small businesses, according to this survey. This section has shown how 

much small businesses pay when they subscribe to a particular telecommunications 

service. Information on these user-only telecommunications expenditures are 

summarized on separate tables for each major industry in Appendix C of this report. 

Furthermore, data on these user-only telecommunications expenditures are also 

summarized on separate tables comparing each industry across the range of 

telecommunications services and can be found in Appendix D of this report. 

Earlier sections in this report have provided considerable details on the underlying results 

of the telecommunications survey of small businesses. These details have included 

expenditure data for small businesses in terms of firm size and industry, as well as for 

small businesses located in metropolitan or non-metropolitan areas. In addition, this 

report has provided information on small businesses served by CLECs and ILECs. These 

data were provided for all firms, as well as for only those firms subscribing to a specific 

telecommunications service. 

In the next section, however, the survey results will be summarized as a means to identify 

major insights into small business consumption of telecommunications services. 

Specifically, the next section will investigate whether small businesses pay a 

disproportionately higher cost burden than larger firms, whether small business have 

preferences for buying multiple services from a single provider, what factors small 

businesses consider when selecting a telecommunications provider, and what small 

business spend per unit for a telecommunications services. 
57

 Figure 41: Average Monthly Small Business Telecommunications Use

 Firms Served By A Local Telephone Competitor

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 83 4.70 

 Expenditures 53 $206.28 

 

Long Distance (LD) Number of Lines 83 4.70 

 Expenditures 55 $140.58 

 

Local and LD Combined Number of Lines 83 4.70 

 Expenditures 76 $383.45 

 

Wireless Telephone Quantity Reported 64 3.88 

 Expenditures 63 $251.35 

 

Pager and Beepers Quantity Reported 7 2.57 

 Expenditures 7 $39.21 

 

Cable Modem Services Quantity Reported 26 1.58 

 Expenditures 19 $43.21 

 

Satellite (High-Speed) Quantity Reported 2 1.00 

 Expenditures 1 $50.00 

 

DSL Services Quantity Reported 21 1.29 

 Expenditures 14 $88.29 

 

Wireless Broadband Quantity Reported 4 2.50 

 Expenditures 2 $80.00 

 

Dial-Up Internet Services Quantity Reported 28 1.36 

 Expenditures 23 $36.90 

 

T-1 Services Quantity Reported 9 1.11 

 Expenditures 7 $388.75 

 

Other Services Expenditures 1 $125.00 
58

 Figure 42: Average Monthly Small Business Telecommunications Use

 Firms Served By An Incumbent Local Telephone Company

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 316 3.20 

 Expenditures 219 $180.94 

 

Long Distance (LD) Number of Lines 316 3.20 

 Expenditures 220 $159.09 

 

Local and LD Combined Number of Lines 316 3.20 

 Expenditures 314 $297.84 

 

Wireless Telephone Quantity Reported 226 3.10 

 Expenditures 237 $236.18 

 

Pager and Beepers Quantity Reported 20 4.55 

 Expenditures 23 $73.10 

 

Cable Modem Services Quantity Reported 83 1.33 

 Expenditures 64 $56.40 

 

Satellite (High-Speed) Quantity Reported 14 1.07 

 Expenditures 12 $69.58 

 

DSL Services Quantity Reported 66 1.11 

 Expenditures 55 $62.63 

 

Wireless Broadband Quantity Reported 8 1.00 

 Expenditures 6 $51.67 

 

Dial-Up Internet Services Quantity Reported 130 4.40 

 Expenditures 124 $30.95 

 

T-1 Services Quantity Reported 8 2.00 

 Expenditures 5 $798.80 

 

Other Services Expenditures 4 $65.00 
59

VI. Summary Analysis of the Results 

Thus far, this report has shown the survey results in much detail. In this section, the 

survey results will be summarized for the purpose of identifying key insights into small 

business consumption of telecommunications services. 

A. Effects of Firm Size and the Burden of Telecommunications Costs 

Of survey respondents, 432 small businesses provided information on their firm’s 

employee size. The average firm in the sample had 8.8 employees, but the median value 

was only 3, indicating the concentration of very small firms in the sample. In fact, most 

firms indicated that they had only one employee. This concentration of very small firms 

is evident in business statistics in general. As mentioned earlier in this report, by 

comparing the size distribution of the sample to the total population, the survey appears 

to be a reasonably accurate representation of the small business segment. 

Earlier in this report, a question was raised as to the extent to which telecommunications 

costs are a disproportionately greater burden on small business vis-à-vis large businesses. 

As previously mentioned, large businesses can frequently buy services at volume 

discounts and can migrate to various technologies, like PBXs and LANs, that permit 

savings not possible for many smaller firms. In other words, because larger firms can 

achieve lower costs per unit, telecommunications costs may represent a smaller share of 

these businesses’ total costs, compared to smaller firms. If very small firms do indeed 

pay disproportionately higher costs than other firms, then these small firms are said to 

face a higher cost burden. The results of this survey can be used to test this hypothesis – 

that the cost burden of telecommunications expenditures increases as firm size decreases. 

In order to test this hypothesis, the small business sample results were segmented into 

three firm sizes – firms with 0 to 4 employees, firms with 5 to 9 employees and firms 

with 10 to 499 employees. As expected, Figure 43 (on page 60) shows that average 

expenditures increases as firm size increases. The positive relation between firm size 

(defined either in terms of employment size or revenue size) has been evident throughout 

this report, and is affirmed once again. 

While the survey data shows that costs do increase with size, it does not indicate whether 

the cost burden of these firms, in fact, either decreases or increases with size. A small 

business would face a cost burden if telecommunications costs as a percentage of total 

company costs increases as firm size decreases. In other words, if small businesses pay 

disproportionately more for telecommunications than larger businesses, then a cost 

burden is said to exist. However, assessing the cost burden of telecommunications 

expenditures upon small businesses requires that costs be standardized to control for the 

size of the firm. 
60

Figure 43: Average Monthly Expenditure By Firm Size 

(Sample Size Noted in Parenthesis Below Each Figure)

 

Employment Size 

Service 0-4 5-9 10-499

Local Telephone Services $ 102.71 $ 208.65 $ 363.82 

(167) (52) (62) 

 

Long Distance (LD) $ 53.70 $ 125.15 $ 437.02 

(170) (52) (62) 

 

Local and LD (Combined) $ 153.20 $ 344.96 $ 645.26 

(230) (72) (97) 

 

Wireless Telephone $ 72.70 $ 180.61 $ 415.06 

(233) (74) (100) 

Pager and Beepers $ 0.98 $ 4.07 $ 13.36 

(240) (78) (105) 

 

Cable Modem Services $ 9.07 $ 18.53 $ 11.35 

(227) (68) (98) 

 

Satellite (High-speed) $ 1.32 $ 3.64 $ 2.74 

(239) (77) (106) 

 

DSL Services $ 7.27 $ 8.48 $ 24.71 

(229) (73) (97) 

 

Wireless Broadband $ 0.77 N.A. $ 2.74 

(235) (78) (106) 

Dial-up Internet Services $ 0.20 $ 10.04 $ 15.78 

(233) (76) (98) 

 

T1 Service $ 0.19 $ 21.17 $ 48.46 

(238) (77) (104) 

 

Other Telecommunications Services $ 0.56 $ 1.92 $ 0.96 

(239) (78) (104) 

In their study on the burden of regulatory costs on small businesses, Crain and Hopkins 

standardize costs by calculating these costs on a per employee basis.23 Figure 44 (shown 

 

23 Crain and Hopkins, 2001. 
61

below) provides empirical evidence that the cost burden of telecommunications services 

(per employee) decreases with firm size. In other words, while total spending increases 

as the firm size increases, telecommunications costs per employee falls. Therefore, very 

small businesses have a disproportionately higher cost burden than larger small 

businesses. This supports the hypothesis that small firms are disadvantaged, relative to 

larger firms, in their ability to scale their costs in proportion to their business size. 

Figure 44: Average Monthly Expenditure Per Employee 

For Firms That Use and Pay For a Specific Telecommunications Service 

 

 Employment Size 

Service 0-4 5-9 10-499

 

Local Telephone Services $ 40.31 $ 21.92 $ 7.58 

 

Long Distance (LD) $ 21.45 $ 13.14 $ 9.10 

 

Local and LD (Combined) $ 82.81 $ 50.18 $ 20.99 

 

Wireless Telephone $ 39.81 $ 27.00 $ 13.86 

Pager and Beepers $ 0.55 $ 0.64 $ 0.47 

 

Cable Modem Services $ 4.84 $ 2.55 $ 0.38 

 

Satellite (High-speed) $ 0.74 $ 0.57 $ 0.10 

 

DSL Services $ 3.91 $ 1.25 $ 0.83 

 

Wireless Broadband $ 0.42 N.A. $ 0.10 

Dial-up Internet Services 

T-I Services 

Other Services 

 $ 5.58 

 $ 0.11 

 $ 0.32 

 $ 1.54 

 $ 3.29 

 $ 0.30 

 $ 0.50 

 $ 1.75 

 $ 0.03 

 

 Note: Averages exclude firms that do not subscribe to the services shown. 

Considering that universal service subsidies tend to keep residential rates lower at the 

expense of businesses rates, the harm to small businesses is quite evident. While 

residential consumers benefit from lower (subsidized) local telephone rates and larger 

businesses benefit from economies of scale, small businesses are less likely to see either 

of these benefits. Therefore, telecommunications policies that charge higher business 

rates for the purpose of securing lower residential rates pass these higher rates to small 

businesses more so than other business groups. As a result, there is a disparate impact on 

small businesses resulting from these public policies. 
62

B. Preference for Bundled Telecommunications Services 

Another aspect of telecommunications use that has been overlooked by general 

telecommunications statistics deals with customer preferences for buying bundled 

services. Bundled services are a combination of services that telecommunications 

providers package and sell to consumers at prices generally lower than the cost of buying 

these services separately. These bundles can save some consumers money. For example, 

many telecommunications providers offer unlimited local and long distance calling to 

small business for a discounted price. For small businesses that make many long distance 

calls in a month, the saving from the bundle could be significant. 

Of the 427 small businesses responding to this survey question, 338 (79.2%) indicated a 

preference for bundled services to be provided by a single telecommunications provider. 

However, as Figure 45 (below) shows there appears to be little consensus on what that 

bundled service should be. Of the survey’s twenty-eight reported combinations of 

services, Local, long distance (LD), wireless and Internet services was the most often 

cited bundle with 12.2%. 

Figure 45: Service Bundles 

Most Often Cited By Small Business

Combination of Services Percent Cited

All services 6.8% 

Local, LD, Internet, Wireless and Yellow Pages 10.8% 

Local, LD, Internet, Wireless and Cable TV 5.6% 

Local, LD, Internet and Wireless 12.2% 

Local, LD and Internet 6.1% 

Local, LD and Wireless 5.9% 

Local and LD 5.9% 

Local 8.7% 

20 Miscellaneous Service Bundles 17.2% 

Not Wanting Service Bundles 20.8% 

 

 Note: 7.3% of small businesses did not respond. 

While there was little consensus on what services should makeup the bundle, Figure 46

(on page 63) shows that local (75.6%) and long distance (66.5%) services were most 

likely to be part of the bundle that small businesses want. In addition, 85% of small 
63

businesses (a figure not shown) want their services combined onto a single bill. The 

conclusion here is that small businesses demand service bundles and the simplicity of a 

single bill. However, as shown earlier in Figure 45, 20.8% of small businesses did not 

want their services bundled at all. 

Figure 46: Telecommunications Services Most Likely To be Included 

as Part of a Bundled Package 

(Sample Size of 427 Firms) 

 

Frequency Percentage 

Service To Be Bundled Included Included

 

Local Service 323 75.6% 

Long Distance 284 66.5% 

Internet and Data 213 49.0% 

Wireless Telephone 199 46.6% 

Yellow Pages 124 29.0% 

Cable TV 67 15.7% 

 

C. Factors in Selecting Telecommunications Providers 

The questionnaire asked small businesses to rank how important certain factors were to 

them when selecting of a telecommunications provider. Figure 47 (on page 64) shows 

that quality and reliability are the most important factors in selecting a provider, closely 

followed by price and customer service. Customer care and billing accuracy were also 

very important considerations for small businesses in choosing the right 

telecommunications service providers. Interestingly, name brand proved to be least 

important in picking a provider. This question also permitted respondents to add and 

rank their own factors (listed as other in Figure 47). These additional factors are listed in 

the Appendix E located at the end of this report. 

 
64

Figure 47: Small Business Rank of Importance 

In Deciding a Telecommunications Provider 

(Not Important=1 and Very Important=5) 

 

Attribute / Factor Average Median Mode N

 

Price 4.6 5 5 424 

 

Quality & Reliability 4.8 5 5 424 

 

Customer Service 4.6 5 5 402 

 

Name Brand 2.5 3 3 406 

 

Choice of Services & Features 4.0 4 5 415 

 

Billing Accuracy and Options 4.6 5 5 414 

 

Provider's Financial Stability 3.9 4 5 410 

 

Installation & Service Start Date 3.9 4 5 411 

 

Recommendation by Others 3.3 3 4 400 

 

Other (Specified in Appendix) 3.6 4 5 31 

D. Average Expenditure Per Unit 

The questionnaire did not explicitly ask small businesses to provide the prices they paid 

for services. However, given that many provided the quantity of each service used and 

the expenditures for each service used, expenditure per unit was calculated. However, 

since this required the pairing of quantity and expenditures, the sample size for this data, 

shown as Figure 48 (on page 65), is somewhat smaller, particularly at the subgroup level. 

Nonetheless, the results provide a benchmark of charges paid by small businesses for 

common telecommunications services. For example, average expenditure per line for 

local telephone services was nearly $60 per month. As with all services here, these 

expenditures are likely to include numerous features and options. For local telephone 

services, for example, the average expenditure per unit may include such features and 

charges as basic service, usage, voice mail, automatic line hunt (rollover), value-added 

services (i.e., speed dialing and caller ID) and other fees (such as taxes, federal subscriber 

line charges and universal service fees). For this reason, expenditure per line is not truly 

a measure of price. 
65

Figure 48: Small Business Average Monthly Expenditure Per Unit 

 

# Paired Expense 

Service Observations Per Unit

Local Telephone Services 259 $ 59.71 

Long Distance Services 259 $ 50.25 

Local and LD (Added Above) 259 $ 109.96 

Local and LD (Combined Reporting) 373 $ 96.06 

Wireless Telephone 273 $ 76.67 

Pager and Beepers 25 $ 16.04 

Cable Modem Services 79 $ 38.34 

Satellite (High-speed) 13 $ 63.21 

DSL Services 66 $ 55.40 

Wireless Broadband 6 $ 31.11 

Dial-up Internet Services 142 $ 23.44 

T-1 Services 12 $ 419.71 

Other Services 3 $ 83.33 

As previously noted, wireless expenditures exceed long distance expenditures for the 

small business segment. Figure 48 shows that small businesses also pay more per 

wireless telephone than they do for long distance services per wire line. The data also 

indicate that small businesses reporting separate local and long distance information pay 

more than the average spending for combined local and long distance services. This 

provides some limited evidence that bundled services are priced lower. The survey data 

also indicates that small businesses pay less for cable modem services, which may 

explain, in part, why the penetration rate for this service is higher than other high-speed 

services. 

This section summarized the remaining portions of the survey results, including 

information on the effects of size, telecommunications burden, preferences for bundled 

services, factors influencing the selection of telecommunications service providers and 

average expenditures per unit. The section to follow will use this information and 

information from previous sections to analyze several key telecommunications issues as 

they pertain to the small business market segment. 
66

VII. Survey Results on Important Current Topics 

This survey provides some interesting insights into topics that involve ongoing legislative 

and regulatory debates. While the data from this survey do not solve these debates, they 

provide some useful information not previously known about the small business market 

segment and its use of telecommunications services. 

The Telecommunications Act set out to achieve three major goals – to lower consumer 

prices, increase quality of service and accelerate the deployment of advances services – 

all by means of decreasing regulations and increasing competition.24 While much has 

changed as a result of the Act, little factual data has been presented as to the effects that 

the Act has had on small businesses. However, results from this survey will provide 

estimates of the degree of competition between CLECs and ILECs in the small business 

market, and the extent to which small businesses use Internet access services, particularly 

high-speed services. This section will also provide some insight into wireless 

substitution for wireline telecommunications, and the use of VoIP services by small 

businesses. 

A. Local Competition 

According to FCC data, CLECs serve disproportionately more mid-size and large 

businesses customers than ILECs do.25 The FCC reports indicate that 21.7% of ILEC 

customer lines serve larger business customers (with the remaining 78.3% of the 

customers defined as either residential customers or small businesses with three lines or 

less).26 In comparison, 38.0% of CLEC customer lines are larger business customers.27 

The FCC finding is corroborated by this survey. Based on 418 small businesses reporting 

both employee size and whether they are served by a CLEC or ILEC, 328 small 

businesses were served by ILECs and 90 small businesses were served by CLECs. These 

results show, on average, that ILEC-served small business had 8.50 employees, while 

CLEC-served small business had 10.26 employees. Thus, CLECs tend serve larger 

business customers and, as previously shown, customers that demand more 

telecommunications services. 

Unfortunately, FCC data makes no distinction between residential consumers and small 

businesses, and, therefore, the information necessary to quantify the CLEC’s small 

business market share is publicly unavailable. What is publicly available, however, are 

FCC estimates of CLECs’ total market share, which was estimated to be 14.7%; CLECs’ 

residential market share (including small businesses with three or less lines), which was 

 

24 As stated in the Telecommunications Act of 1996, preamble. 25 The FCC defines a small business as a billing account with three lines or less, and includes these data 

with residential customers when reporting its results. This makes distinctions between small businesses 

and residential customers impossible to discern. Furthermore, as previously discussed, a definition of three 

lines or less does not accurately represent the small business market as defined as having fewer than 500 

employees. 

26 For these data see “Local Telephone Competition: Status as of June 30, 2003, FCC, Dec. 2003, Table 2. 27 Ibid. 
67

estimated to be 12.0%; and CLECs’ market share for other business customers (including 

mid-size businesses, large businesses and government accounts), which was estimated to 

be 23.2% as of June 30, 2003.28 Because these figures are collected from larger local 

telephone service providers (both incumbents and competitors), the FCC has stated that 

its figures underreport CLEC lines as a percent of ILEC lines.29 A survey of customers 

can avoid this underreporting. 

The results of this survey provide an accurate view of market share of ILECs and CLECs 

for the small business market segment. Figure 49 (below) shows that CLECs serve 22% 

of the small business market. The data also show that CLECs have a much greater 

market share in metropolitan areas (29%) than in non-metropolitan areas (11%). From 

this, one can conclude that new competitors are making inroads into the local 

telecommunications market, and, to a greater extent, targeting denser business 

communities. 

Figure 49: Percent Market Share of CLECs 

Sample % Share 

% Metro 244 29% 

% Non-Metro 174 11% 

Total 418 22% 

B. Wireless Substitution 

This report has shown that wireless services have become a very important part of the 

telecommunications requirements of small businesses. This finding is of no surprise, 

considering that there are now 154 million wireless subscribers in the country.30 The 

FCC, in fact, has indicated that, to some extent, wireless telecommunications are 

beginning to replace wireline communications: 

“There is much evidence, however, that consumers are substituting 

wireless service for traditional wireline communications.”31 

The survey provides some insight into the extent to which wireless substitution may be 

occurring in the small business market. Based on the survey, 3.7% of small businesses 

report expenditures for wireless telecommunications services and report no expenditures 

for telephone services. Similarly, 6.0% of small businesses report expenditures for 

 

28 “Local Telephone Competition: Status as of June 30, 2003, FCC, Dec. 2003, Tables 1 and 2. 29 Ibid, p. 1, fn. 3. The FCC is not certain about the extent of this problem. 

30 According to the Cellular Telecommunications & Internet Association (www.wow-com.com/ subscribers 

estimated as of January 14, 2004). 

31 “Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile 

Services,” FCC, Eighth Report, released July 14, 2003, par. 102. 
68

wireless services, and report no expenditures for long distance services. From this it can 

be concluded that some small businesses are using wireless services instead of traditional 

wireline telecommunications services. 

Data of where substitution may be occurring is evident in the construction and 

transportation/warehousing industries. As Table B-4 (in Appendix B) shows, these two 

industries spend more for wireless telecommunications than any other industry, a fact not 

explainable by firm size alone. There is some logic to why these industries are extensive 

users of wireless services. The services that construction and transportation workers 

perform are not done at their business location. For example, plumbers perform their 

trade at their customers’ locations and freight truck drivers perform their services while 

on the road. Therefore, neither plumbers nor truckers are readily accessible in their 

business offices during normal working hours. These businesses, as well as others of a 

similar nature, benefit by using wireless telecommunications over wireline 

telecommunications. 

In summary, data provided throughout this report has shown that wireless telephone 

services are a very important component to the telecommunications needs of small 

businesses. For example, 25.2% of the firms in the survey spend more on wireless 

telecommunications services than local and long distance services combined. Therefore, 

public policies that influence wireless services can have a significant effect on the small 

business market segment. Beyond these rudimentary observations, the actual extent of 

wireless substitution requires more research. 

 

C. Voice-Over-Internet Services 

Voice over Internet Protocol (VOIP) services are a fairly new technology, which converts 

voice communication into packets that are transmitted over the Internet and then 

converted back into voice communication. What users experience are normal voice 

communications services that are near telephone-like quality. The advantage of VoIP is 

that it bypasses traditional circuit switched networks, thereby avoiding the costs of 

traditional (circuit-switched) telephone communications. While still a nascent service for 

domestic and local calling, there is a sizable price advantage for VoIP in international 

calling, and some reports have noted, in the past, an increase in VoIP traffic.32 In recent 

months, major companies have cited quality improvements in VoIP technology and have 

announced their intention to provide these services to the mass-market.33 However, there 

is little public information available on the use of VoIP Service for the small business 

market. 

The results of this survey provide a reference point for the use of VoIP by small 

businesses. Of 418 small businesses, 3.3% said that they do use VoIP service in their 

business. This does not mean that these small businesses have eliminated traditional 

voice service, but it does mean that VoIP is beginning to find its way into small 

 

32 “Voice over IP Used for 6% of Worldwide Telephone Traffic According to TeleGeography,” ITXC, 

News Release, November 6, 2001. 

33 Matt Stump “MSOs, AT&T Set Table For VoIP Rollouts,” Multichannel News, Dec. 15, 2003; and Ben 

Charny “Cox Communications Dives into VoIP,” CNET News.com, Dec. 15, 2003. 
69

businesses and, if it continues to grow, it may soon become a significant competitive 

threat to traditional telephony providers. VoIP may also be a threat to the entire system 

of subsidies, universal service, access fees, monthly subscriber line charges and 

government taxes that make their way onto consumer bills. It remains unclear whether 

VoIP operators will be subject to many of the same requirements placed upon telephone 

companies. As a result, this topic is one of increasing public policy debate. 

D. Internet Access and Broadband Services 

The Act calls for the timely deployment of advanced services.34 To what degree are 

high-speed services, such as DSL and cable modem services, used by small businesses? 

The FCC reports that residential and small business customers account for 88% of highspeed lines in use.35 However, the FCC data does not distinguish between residential, 

small business and other business segments.36 The FCC does publish total market share 

statistics and finds cable with 58.3%, asymmetrical DSL with 32.7%, other wireline with 

5.2%, fiber with 2.5% and satellite and fixed wireless services with 1.3% of lines in 

service.37 

As for the market shares pertaining to the small business segment, again, there is 

insufficient public data. This survey, however, provides some useful insights for the use 

and expenditures of online services, as well as high-speed services. Earlier, Figure 30

showed that high-speed service penetration was not widespread, accounting for 26%, 4%, 

21%, 3% and 4% of small businesses using cable modem, satellite, DSL, wireless 

broadband and T-1 services, respectively. Using these penetration rates to estimate the 

number of small businesses using broadband services, the market share of broadband 

users can be estimated to be 45.2% for cable modems, 6.6% for satellite, 36.1 for DSL, 

5% for wireless broadband and 7.1% for T-1 services. These market share figures are 

based on the number of small businesses using a particular broadband service as a 

percentage of total small businesses using any form of broadband service. 

Besides using the number of broadband-subscribing small businesses to estimate 

broadband service market share, the number of broadband units in services, as well as the 

total expenditures incurred for each broadband service, provides two alternative ways to 

estimate market share.38 For example, Figure 50 (on page 70), shows DSL service as 

having a market share of 32.1%, when taking the number of DSL units as a percentage of 

all forms of broadband services. Similarly, Figure 50 shows DSL service as having a 

 

34 These services are sometimes referred to as broadband services or high-speed services for Internet 

access. 

35 See “High-Speed for Internet Access: Status as of June 30, 2003,” FCC, December 2003, comparing 

Tables 1 and 3. This assumes services with speeds exceeding 200 kilobits per second in at least one 

direction. 

36 The FCC explains that its Form 477 does not report high-speed services by type of customer. The FCC 

assumes that advanced services are used by large businesses first and otherwise used by other segments, 

such as small businesses. See, Op. Cit. p. 3, fn. 8. 

37 “High-Speed Services for Internet Access: Status as of June 30, 2003,” FCC, December 2003, Table 1. 

Asymmetrical DSL are services that have much higher downloading speeds than uploading speeds. The 

FCC includes other (symmetrical) DSL services along with T-1 services in the category other wireline. 38 The number of units is the quantity of broadband connections reported by the small business. In its 

periodic high-speed reports, the FCC refers to this (generically) as high-speed lines. 
70

market share of 27.2%, when taking the total expenditures for DSL services as a 

percentage of total expenditures for all forms of broadband services. 

 Figure 50: Percent Market Share of Small Businesses 

 For High-Speed Internet Access Services 

 % Units % Expenditures

Cable Modems 48.4 25.8 

 

Satellite 5.4 5.2 

DSL 32.1 27.2 

Wireless Broadband 5.8 2.7 

T-1 8.3 39.1 

 100.0% 100.0% 

Figure 50 shows some interesting facts. First, cable modem services account for 48.4% 

of the small business market share in terms of units in use. This number is slightly less 

than the FCC figure (58.3%) cited earlier. One reason that the share in the small business 

market is lower than the share in the overall market is that cable companies have only 

recently began to target business customers.39 Initially, cable operators built their 

networks to provide cable televisions services, making these services available to 97% of 

U.S. households.40 However, with the advancement of cable networks capable of 

providing two-way communications, such as telephone services and high-speed Internet 

access, cable operators have expanded their reach well into the business community. 

Estimates suggest that cable modem networks are available to almost 75% of the business 

community, as well as 80% of households.41 In addition, many home-based businesses, 

non-employer businesses and small business located near residential market are likely to 

have access to residential services. 

Also, note the effect that average expenditures per unit (seen earlier in Figure 48) has on 

market share. Because small businesses spend less on average for cable modem service 

 

39 See Ahmet Ozalp, “Making the Case for Cable SMB Services: The Revenue Opportunity for Small-toMedium Size Business Telecom Services Exceeds That of Today’s Cable Television Business,” Cable 

Datacom News, January 2002; “Comcast Bullish About Business Services,” Cable Datacom News, April 

2001; and “Cox and @Work Take Aim At Small Business Market,” Cable Datacom News, March 1998. 

40 National Cable Telecommunications Association reports this figure at www.ncta.com, citing Broadband 

Cable TV Financial Databook, 2002, p. 10. 41 For an estimate of the availability of cable modem service to the business market see Barry Hardek, “ 

Cable CLECs Poised To Fill Void,” Cable Datacom News, August 2001, p. 1. For an estimate of 

households passed see the National Cable Telecommunications Association at www.ncta.com, citing: 

Morgan Stanley, "Where There is a Willner... There's a Way," December 27, 2002, p.61; "Fruit Salad," 

April 7, 2003, p.42; and Kagan World Media, Broadband Technology, September 12, 2002, p.2. 
71

than DSL service, cable modem market share in terms of units is higher than its market 

share in terms of expenditures, as depicted in Figure 50. As for T-1 services, the 

opposite is true – the market share for T-1 services in terms of units is relatively small, 

but in terms of expenditures is relatively high, because T-1 services are relatively pricy. 

Whether it is DSL, cable modem, T-1, satellite or other wireless high-speed service, 

when combined, 48% of small business use some form of broadband service, an 

indication that some small businesses use multiple forms of broadband services. In 

contrast, dial-up services are still a very popular means for small businesses to connect to 

the Internet, accounting for 38% of small businesses. In fact, some broadband users 

continue to subscribe to dialup access services. However, 27% of small businesses do 

not subscribe to either broadband or dialup service. 

The survey data does not provide enough insight to explain whether the choice of dial-up 

or broadband is based on preference, price or availability of services. This is an area that 

needs further research. 

VIII. Summary 

This survey makes a contribution toward understanding small businesses’ use of 

telecommunications services, an area where data, until now, has been lacking. This 

report and others like it will help provide a better understanding of how small business 

customers use telecommunications services – what they buy, how much they buy and 

how these expenditures are influenced by geography, industry and firm size. 

Furthermore, this survey provides a better understanding of influences from recent 

changes affecting telecommunications services, such as local service competition, the 

emergence of VoIP services and the degree to which small businesses use high-speed 

data services for Internet access. The major findings in this report are: 

• Industry differences and firm size account for much of the variation in 

telecommunications consumption. Small businesses located in non-metropolitan 

areas tend to be smaller and spend less for telecommunications services. 

Smaller firms are sometimes more apt to buy certain services over others. 

• Wireless services represent a major portion of small businesses’ 

telecommunications consumption. For some industries, wireless spending rivals 

and exceeds spending of wireline services (local and long distance) 25% of the 

time. 

• The burden of telecommunications costs on small businesses appears to increase 

as the size of firms decrease. In other words, very small firms face a 

disproportionately higher cost burden (cost per employee) than larger businesses. 

This may suggest that policies that increase business prices in order to decrease 

residential prices are disadvantaging small business owners. 

• This report provides market share statistics on the local exchange market and 

finds that CLECs now serve 22% of small businesses, including 29% in 

metropolitan areas and 11% in non-metropolitan areas. On average, small 

businesses served by CLECs tend to be somewhat larger in terms of employment 
72

and these businesses tend to purchase more telecommunications services than 

small businesses served by ILECs. 

• VoIP services are now used by 3% of small businesses, indicating the first signs 

that this nascent service may be finding its way into small business 

telecommunications users. 

• Dialup Internet access is used by 38% of small businesses. Broadband services 

have not found widespread use in the small business market, although cable 

modem services (26%) and DSL services (21%) are most commonly found. 

• The survey finds that small business want service bundles and prefer to have 

multiple telecommunications services on one bill. This survey also finds that 

small business rank quality and service first, and price second when considering 

what factors are most important in picking a telecommunications provider. 

Name brand was of least importance, according to the survey results. 

 

It is hoped that, as changes in competition, technology and public policy occur, these data 

can help legislators, regulators and advocates quantify the impacts of these changes on 

the small business market segment. However, more research is needed to better 

understand these trends affecting use and expenditures of telecommunications services. 

One limitation of this report was its sample size, an area that future studies should 

address. The attainment of additional survey research in this area would be useful in 

providing periodic updates for an ever-changing industry, as well as eventually creating a 

time series data, which would permit a better understanding of how changes in policy, 

technology and competition affect small businesses perception and consumption of 

telecommunications services. 
73

Appendix A 

Survey Questionnaire and 

Additional Survey Materials 

1. Explanation of the questionnaire, information on the 

mailing and timing of the mailing; 

2. Cover Letter;42

3. Questionnaire. 

 

42 Please note, the cover letter and survey included an OMB number and date in the upper right hand 

corner. The copy in Appendix A omits this information. 
74

Appendix A 

The Questionnaire and Timing of the Mailing 

5,000 surveys were sent to a sample of randomly selected small businesses. The 

envelope and enclosed cover letter were addressed to each small business by company 

name and address, including the name of a key executive at the small business, generally 

the company owner or president. The cover letter, which follows this section of the 

Appendix A, describes the purpose of the study, its connection to a Small Business 

Administration contract and when the survey would be due. The letter also mentioned 

that the survey was voluntary, and it included the relevant OMB code and date, as 

required for government sponsored data collection. 

The survey was mailed in early September and included a pre-paid envelope for 

responses. A follow-up postcard was sent 10 days later to remind those who received the 

survey to return it. The survey asked respondents to return the survey by October 9th. 

Based on the volume and date of returns, the end of September would appear to be the 

period most closely associated with the median date of the results. 

Like the cover letter, the survey questionnaire is shown in this Appendix. The survey 

included eight question areas that often required multiple responses from survey 

participants. The eight question areas covered are as follows: 

1. Employee Size 

This question area was used to identify under-representation of responses relative to the 

sample universe. Responses to this question were also used to link employment size to 

telecommunications use, which provided insight into the degree of economies of scale 

within the small business segment. 

2. Location 

This question area asks for the number of business locations, the location of the primary 

business and whether the location is in a metropolitan area. The number of business 

locations provides the count of the number of establishments, a unit of measure common 

in Federal business statistics. By identifying which businesses do not operate in 

metropolitan areas, this survey attempts to identify those areas more likely to be rural, 

and, accordingly, higher cost for ILECs and CLECs to serve. Universal service policies 

frequently deal with rural customer issues. 

3. Industry 

Telecommunications spending may vary by industry.43 Including this variable in the 

survey will permit a better understanding of how telecommunications use differs for these 

broad industries for the small business market segment. 

 

43 This study uses new the North American Industry Classification system (NAICS). 
75

4. Preference for Bundling Telecommunications Services 

Many telecommunications providers are competing for customers by offering bundled or 

packaged services, such as a combination of local, long distance, Internet access and 

cable television programming services. These packages frequently offer lower prices 

than services offered separately or through multiple service providers. The goal of 

bundling is to attract and retain customers by offering them a wider range of services and 

providing them the simplicity of a single bill. This survey will collect data on the extent 

to which customers want bundled services, which services (if any) they want bundled, 

and whether they prefer a single bill for these services. 

5. Factors Influencing the Choice of a Telecommunications Provider 

This question area asks small businesses to identify the most important factors used to 

select a telecommunications service provider. The factors include price, quality, 

customer services, and other factors. This question is important, since regulations 

sometimes deal with areas of affordability and set quality standards. This question will 

provide insight into what factors small businesses perceive to be most important. 

6. Telecommunications Use and Expenditures by Service Type 

This question area asks small businesses to identify for each service – what they buy, 

how much they buy and how much they spent in the most recent month. Later, this data 

can be cross-tabulated with other key variables, such as industry type and employment 

size. This is the most important question area, but also the most difficult for small 

businesses to answer. The questionnaire includes a subpart question that asks 

respondents whether or not they use a new technology platform called Voice-overInternet Services. This service uses Internet packet technology to simulate telephone-like 

voice services – providing local, long distance and international calling and bypassing 

traditional telecommunications networks, billing, taxes and regulatory fees. 

7. Market Share for Local Telephone Services 

One of the more important aspects of the Act of 1996 was the opening of local 

telecommunications services market to competitors. This question asks small businesses 

whether they use a competitor (CLEC) or a long established incumbent local telephone 

company (ILEC). Since the FCC does not keep market share statistics for small 

businesses, this question area is an important addition to the collection of data on 

telecommunications use.44

8. Revenue Size 

This question area, similar to employment size, asks respondents to classify their business 

in terms of revenue size. This variable will help in understanding how the survey 

respondents differ in terms of the total output of the firm. 

 

44 The FCC does collect market share data on residential competition that includes businesses with less than 

four lines. 
76

TeleNomic Research, LLC Strategic and Economic Consulting Services

September 25, 2003 

Dear Small Business Owner: 

The Office of Advocacy of the United States Small Business Administration (SBA/OA) has 

requested a research study (Request No. SBAHQ-020Q-0025) to analyze small businesses’ use of 

telecommunication services. TeleNomic Research is under contract by the SBA/OA to conduct 

this important study. 

Your firm was randomly selected to complete a short voluntary questionnaire. We ask that you 

fill out the enclosed questionnaire and return it in the enclosed envelope. Your timely response to 

this survey is necessary and essential for SBA/OA to advocate on behalf of small businesses 

against adverse changes in telecommunication public policy, legislation, taxes, and regulation. 

Our field-testing indicates that this should not take more than 5 minutes of your time. However, 

if you have any comments or questions regarding the accuracy of this burden estimate or any 

suggestions for reducing the burden, we invite you to contact Dr. Radwan Saade, Regulatory 

Economist of the U.S. Small Business Administration, Office of Advocacy, 409 3rd Street, SW, 

Suite 7800; Washington, DC, 20416 (email: Radwan.Saade@sba.gov.) Because the envelope and 

questionnaire have not been marked or coded, your survey responses will remain anonymous. 

Please complete (or have your office manager complete) the attached survey and return it in the 

enclosed postage-paid envelope by October 9, 2003. Thank you for your time. 

Best Regards, 

Steve Pociask 

President 

P.S. – Your timely response to this survey is essential in helping the SBA/OA be responsive to 

small business issues. 

 

Please note that on the top right hand corner of this page and the enclosed questionnaire there is an OMB 

control number and an expiration date. Neither the SBA nor any other agency of the Federal government is 

permitted to conduct or sponsor (and an individual is not required to respond to) a collection of 

information unless it displays a currently valid OMB control number and expiration date. 

SBA-Study, P.O. Box 710624, Herndon, VA 20171 

Email: SBA-Survey@TeleNomic.Com
77

Small Business Administration Questionnaire 

Please Return by October 9, 2003 

1. How many employees does your company have? _________ 

2. Location: A. How many business locations does your firm have? #_______ 

B. In what state is your primary business location? ________________ 

C. Is your primary business located within a metropolitan area? 

Please check (3) one  Yes  No

3. Which industry best describes your business? (Check only one) 

 Construction and specialized trade contracting (1) 

 Manufacturing (2) 

 Wholesale trade (3) 

 Retail trade (4) 

 Transportation, warehousing & courier services (5) 

 Information services-- publishing, computer services & communications (6) 

 Finance, banking, securities & insurance (7) 

 Real estate, rental & leasing (8) 

 Professional, scientific, legal, consulting, PR, photography & technical (9) 

 Administrative, temporary, call centers, landscaping & waste services (10) 

 Educational and instructional services (11) 

 Health care, medical services & social assistance (12) 

 Lodging, accommodations, foodservices & restaurants (13) 

 Repair, maintenance, laundry & personal services (14) 

 Other (please specify)________________________________________ (15) 

4. If one company could provide all of your telecommunications services, which services would 

you want provided by one company? (Check all that apply) 

Local telephone Long distance Internet & Data 

Wireless Yellow Page Ads Cable TV programming 

 None of the above, I prefer multiple providers (Skip to question #5) 

4A. Would you want these services combined on one bill?  Yes  No

5. When choosing a telecommunications provider, how important are the following attributes to 

your decision? (Circle each attribute to indicate its relative importance) 

 Not Important Very Important 

Price 1 2 3 4 5 

Quality & reliability 1 2 3 4 5 

Customer service 1 2 3 4 5 

Name brand 1 2 3 4 5 

Choice of services & features 1 2 3 4 5 

Billing accuracy and options 1 2 3 4 5 

Provider’s financial stability 1 2 3 4 5 

Installation & service start date 1 2 3 4 5 

Recommended by others 1 2 3 4 5 

Other ( ) 1 2 3 4 5 
78

Small Business Administration Questionnaire – Page 2 

6A. Please provide a current estimate of your company’s monthly use and expense (include all 

usage charges, fees and taxes) for the following services. Please leave blank, any services that 

you do not use. 

 Number of Monthly 

 units in use expenditures 

Local telephone service lines # $ 

Long distance telephone service N/A $ 

 

Mobile (incl. PCS, Cellular, and others) # $ 

Pagers and beepers # $ 

Cable modems in service # $ 

High-speed satellite data links # $ 

DSL lines # $ 

Wireless broadband # $ 

Dial-up Internet service accounts # $ 

High-speed T1 data lines (incl. PRIs) # $ 

High-speed T3 data lines in service # $ 

 

Other (e.g., ISDN, BRI, VG services) # $ 

 (Specify ____________________) 

 

6B. Does your company use Voice-over-Internet communication?  Yes  No

7. What best describes your businesses’ local telephone company provider: 

 The long-established (incumbent) local telephone company 

 A competitor of the incumbent local telephone company 

8. What was your firm’s total revenue (sales) for last year: (Check only one)

 A. Less than $200,000  C. Between $1M and $5M 

 B. Between $200,000 and $1 Million (M)  D. Greater than $5M 

Please mail the survey back to us by October 9, 2003. Thank you!

Please send questions by email to SBA-Survey@TeleNomic.Com or call (703) 471-3954.
79

Appendix B 

Comparisons of Industries by Type of Telecommunications Service 

All Reporting Small Businesses* 

Table B1: Local Telephone Services by Industry 

Table B2: Long Distance Services (LD) by Industry 

Table B3: Long Distance and LD Services by Industry 

Table B4: Wireless Telephone Services by Industry 

Table B5: Pager and Beeper Services by Industry 

Table B6: Cable Modem Services by Industry 

Table B7: Satellite (High-Speed) Services by Industry 

Table B8: DSL Services by Industry 

Table B9: Wireless Broadband Services by Industry 

Table B10: Dial-up Internet Services by Industry 

Table B11: T-1 Services by Industry 

Table B12: Other Services by Industry 

Table B13: All Service Expenditures by Industry 

* - These tables average results for all reporting small businesses – both 

subscribers and nonsubscribers. 
80

Appendix B

Table B1: Average Monthly Expenditures 

Local Telephone Services 

 

 Industry N All Firms 

Farming/Agriculture 5 $42.80 

Construction 43 $210.14 

Manufacturing 9 $163.33 

Wholesale Trade 10 $229.50 

Retail Trade 50 $148.79 

Transportation and Warehousing 7 $179.97 

Information Services 14 $181.64 

Finance and Insurance 9 $347.56 

Real Estate, Renting and Leasing 15 $157.26 

Professional, Scientific and Tech. 40 $144.25 

Administrative, Waste and Remediation 9 $242.44 

Education, Entertainment, Public Admin. 13 $190.08 

Health Care and Social Assistance 18 $258.33 

Accommodation and Food Services 10 $169.00 

Repair, Laundry and Personal Services 27 $135.89 

All Industries 281 $179.93 

Table B2: Average Monthly Expenditures 

Long Distance (LD) 

 

 Industry N All Firms 

Farming/Agriculture 5 $76.20 

Construction 44 $69.20 

Manufacturing 9 $207.22 

Wholesale Trade 11 $259.55 

Retail Trade 51 $92.06 

Transportation and Warehousing 7 $176.14 

Information Services 14 $86.79 

Finance and Insurance 9 $1,211.67 

Real Estate, Renting and Leasing 15 $109.96 

Professional, Scientific and Tech. 40 $116.83 

Administrative, Waste and Remediation 9 $246.89 

Education, Entertainment, Public Admin. 13 $113.46 

Health Care and Social Assistance 18 $148.17 

Accommodation and Food Services 10 $77.60 

Repair, Laundry and Personal Services 27 $110.20 

All Industries 284 $150.47 
81

Appendix B

Table B3: Average Monthly Expenditures 

Local and LD Combined 

 

 Industry N All Firms 

Farming/Agriculture 8 $91.25 

Construction 63 $261.68 

Manufacturing 12 $452.08 

Wholesale Trade 11 $581.82 

Retail Trade 74 $215.71 

Transportation and Warehousing 9 $294.20 

Information Services 15 $258.40 

Finance and Insurance 12 $1,243.25 

Real Estate, Renting and Leasing 20 $482.67 

Professional, Scientific and Tech. 48 $247.04 

Administrative, Waste and Remediation 11 $418.09 

Education, Entertainment, Public Admin. 17 $273.76 

Health Care and Social Assistance 32 $315.97 

Accommodation and Food Services 20 $212.55 

Repair, Laundry and Personal Services 43 $234.97 

All Industries 399 $307.43 

Table B4: Average Monthly Expenditures 

Wireless Telephone 

 

 Industry N All Firms 

Farming/Agriculture 7 $90.86 

Construction 64 $382.20 

Manufacturing 13 $202.56 

Wholesale Trade 13 $131.54 

Retail Trade 76 $137.87 

Transportation and Warehousing 9 $371.22 

Information Services 15 $243.33 

Finance and Insurance 12 $255.00 

Real Estate, Renting and Leasing 21 $176.82 

Professional, Scientific and Tech. 48 $100.67 

Administrative, Waste and Remediation 10 $137.00 

Education, Entertainment, Public Admin. 17 $130.00 

Health Care and Social Assistance 34 $71.41 

Accommodation and Food Services 21 $72.29 

Repair, Laundry and Personal Services 43 $128.35 

All Industries 407 $176.44 
82

Appendix B

Table B5: Average Monthly Expenditures 

Pager and Beepers 

 

 Industry N All Firms 

Farming/Agriculture 8 $0.00 

Construction 65 $5.68 

Manufacturing 13 $5.37 

Wholesale Trade 13 $0.38 

Retail Trade 79 $0.08 

Transportation and Warehousing 10 $1.00 

Information Services 17 $5.88 

Finance and Insurance 12 $1.42 

Real Estate, Renting and Leasing 22 $7.84 

Professional, Scientific and Tech. 50 $1.12 

Administrative, Waste and Remediation 11 $1.23 

Education, Entertainment, Public Admin. 19 $42.11 

Health Care and Social Assistance 35 $6.06 

Accommodation and Food Services 22 $0.00 

Repair, Laundry and Personal Services 43 $0.58 

All Industries 423 $4.62 

Table B6: Average Monthly Expenditures 

Cable Modem Services 

 

 Industry N All Firms 

Farming/Agriculture 8 $4.38 

Construction 59 $6.63 

Manufacturing 12 $3.42 

Wholesale Trade 12 $20.50 

Retail Trade 75 $6.44 

Transportation and Warehousing 10 $8.60 

Information Services 15 $24.67 

Finance and Insurance 12 $41.17 

Real Estate, Renting and Leasing 20 $10.25 

Professional, Scientific and Tech. 47 $11.18 

Administrative, Waste and Remediation 11 $16.64 

Education, Entertainment, Public Admin. 17 $21.24 

Health Care and Social Assistance 32 $10.12 

Accommodation and Food Services 20 $17.75 

Repair, Laundry and Personal Services 39 $8.49 

All Industries 393 $11.27 
83

Appendix B

Table B7: Average Monthly Expenditures 

Satellite (High-Speed) 

 

 Industry N All Firms 

Farming/Agriculture 8 $5.00 

Construction 66 $1.97 

Manufacturing 12 $0.00 

Wholesale Trade 13 $0.00 

Retail Trade 79 $4.43 

Transportation and Warehousing 10 $10.00 

Information Services 16 $0.00 

Finance and Insurance 13 $0.00 

Real Estate, Renting and Leasing 22 $0.00 

Professional, Scientific and Tech. 50 $1.50 

Administrative, Waste and Remediation 11 $0.00 

Education, Entertainment, Public Admin. 19 $5.26 

Health Care and Social Assistance 34 $1.76 

Accommodation and Food Services 22 $1.36 

Repair, Laundry and Personal Services 43 $0.00 

All Industries 422 $2.10 

Table B8: Average Monthly Expenditures 

DSL Services 

 

 Industry N All Firms 

Farming/Agriculture 7 $0.00 

Construction 63 $13.33 

Manufacturing 11 $40.00 

Wholesale Trade 11 $14.55 

Retail Trade 73 $7.30 

Transportation and Warehousing 10 $8.00 

Information Services 15 $13.27 

Finance and Insurance 13 $11.15 

Real Estate, Renting and Leasing 21 $3.33 

Professional, Scientific and Tech. 48 $15.31 

Administrative, Waste and Remediation 11 $6.81 

Education, Entertainment, Public Admin. 17 $11.18 

Health Care and Social Assistance 33 $11.64 

Accommodation and Food Services 21 $3.86 

Repair, Laundry and Personal Services 41 $10.00 

All Industries 399 $11.73 
84

Appendix B

Table B9: Average Monthly Expenditures 

Wireless Broadband 

 

 Industry N All Firms 

Farming/Agriculture 8 $0.00 

Construction 65 $0.00 

Manufacturing 13 $10.00 

Wholesale Trade 12 $0.00 

Retail Trade 79 $0.00 

Transportation and Warehousing 10 $0.00 

Information Services 15 $10.67 

Finance and Insurance 13 $0.00 

Real Estate, Renting and Leasing 20 $5.50 

Professional, Scientific and Tech. 50 $1.00 

Administrative, Waste and Remediation 11 $0.00 

Education, Entertainment, Public Admin. 19 $0.00 

Health Care and Social Assistance 35 $0.00 

Accommodation and Food Services 22 $0.91 

Repair, Laundry and Personal Services 43 $0.00 

All Industries 419 $1.12 

Table B10: Average Monthly Expenditures 

Dial-Up Internet Services 

 

 Industry N All Firms 

Farming/Agriculture 8 $5.13 

Construction 64 $12.42 

Manufacturing 12 $7.25 

Wholesale Trade 13 $14.23 

Retail Trade 74 $9.21 

Transportation and Warehousing 10 $8.20 

Information Services 16 $31.81 

Finance and Insurance 12 $20.42 

Real Estate, Renting and Leasing 22 $11.06 

Professional, Scientific and Tech. 49 $11.46 

Administrative, Waste and Remediation 11 $14.55 

Education, Entertainment, Public Admin. 16 $16.88 

Health Care and Social Assistance 34 $6.03 

Accommodation and Food Services 20 $8.45 

Repair, Laundry and Personal Services 42 $10.76 

All Industries 407 $11.51 
85

Appendix B

Table B11: Average Monthly Expenditures 

T-1 Services 

 

 Industry N All Firms 

Farming/Agriculture 8 $0.00 

Construction 65 $0.00 

Manufacturing 13 $3.07 

Wholesale Trade 13 $23.08 

Retail Trade 79 $0.00 

Transportation and Warehousing 10 $0.00 

Information Services 16 $96.88 

Finance and Insurance 12 $219.28 

Real Estate, Renting and Leasing 22 $40.91 

Professional, Scientific and Tech. 49 $9.06 

Administrative, Waste and Remediation 11 $45.45 

Education, Entertainment, Public Admin. 17 $0.00 

Health Care and Social Assistance 35 $0.00 

Accommodation and Food Services 22 $0.00 

Repair, Laundry and Personal Services 43 $8.14 

All Industries 419 $16.03 

Table B12: Average Monthly Expenditures 

Other Services 

 

 Industry N All Firms

Farming/Agriculture 8 $0.00 

Construction 66 $0.00 

Manufacturing 13 $0.00 

Wholesale Trade 13 $0.00 

Retail Trade 77 $2.27 

Transportation and Warehousing 10 $0.00 

Information Services 16 $0.00 

Finance and Insurance 13 $12.31 

Real Estate, Renting and Leasing 22 $2.27 

Professional, Scientific and Tech. 49 $0.00 

Administrative, Waste and Remediation 11 $0.00 

Education, Entertainment, Public Admin. 19 $0.00 

Health Care and Social Assistance 35 $0.00 

Accommodation and Food Services 22 $0.00 

Repair, Laundry and Personal Services 43 $0.00 

All Industries 421 $0.91 
86

Appendix B 

Table B13: Average Monthly Expenditures 

All Services 

 

 Industry All Firms

Farming/Agriculture $196.61 

Construction $683.91 

Manufacturing $723.75 

Wholesale Trade $786.09 

Retail Trade $383.31 

Transportation and Warehousing $701.21 

Information Services $684.90 

Finance and Insurance $1,803.99 

Real Estate, Renting and Leasing $740.66 

Professional, Scientific and Tech. $398.34 

Administrative, Waste and Remediation $639.77 

Education, Entertainment, Public Admin. $500.42 

Health Care and Social Assistance $422.99 

Accommodation and Food Services $317.17 

Repair, Laundry and Personal Services $401.28 

All Industries $543.17 
87

Appendix C 

Average Spending and Quantity 

Users of Services Only 

Figure C1: Farming and Related Industries 

Figure C2: Construction 

Figure C3: Manufacturing 

Figure C4: Wholesale Trade 

Figure C5: Retail Trade 

Figure C6: Transportation and Warehousing 

Figure C7: Information Services 

Figure C8: Finance and Insurance 

Figure C9: Real Estate, Renting and Leasing 

Figure C10: Professional, Scientific and Technical 

Figure C11: Administrative, Waste Management and Remediation 

Figure C12: Health Care and Social Assistance 

Figure C13: Accommodation and Food Services 

Figure C14: Repair, Maintenance, Laundry and Personal Services 

Figure C15: Education, Arts, Entertainment and Public Administration 

Figure C16: Firm Size by Major Industry 

Note: Expenditures reported in these charts are not additive, since they may reflect a 

different sample of users from service to service. 
88

Appendix C

Figure C1: Average Monthly Small Business Telecommunications Use 

 Firms in Farming and Related Industries 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 8 1.63 

 Expenditures 5 $ 42.80 

 

Long Distance (LD) Number of Lines 8 1.63 

 Expenditures 5 $ 76.20 

 

Local and LD Combined Number of Lines 8 1.63 

 Expenditures 8 $ 91.25 

 

Wireless Telephone Quantity Reported 6 2.50 

 Expenditures 6 $ 106.00 

 

Pager and Beepers Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Cable Modem Services Quantity Reported 1 1.00 

 Expenditures 1 $ 35.00 

 

Satellite (High-Speed) Quantity Reported 1 2.00 

 Expenditures 1 $ 40.00 

 

DSL Services Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Wireless Broadband Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Dial-Up Internet Services Quantity Reported 2 1.00 

 Expenditures 2 $ 20.50 

 

T-1 Services Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Other Services Expenditures 0 $ 0.00 

 
89

Appendix C

 Figure C2: Average Monthly Small Business Telecommunications Use 

 Firms in the Construction Industry

 

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 62 2.77 

 Expenditures 40 $ 225.90 

 

Long Distance (LD) Number of Lines 62 2.77 

 Expenditures 41 $ 74.27 

 

Local and LD Combined Number of Lines 62 2.77 

 Expenditures 60 $ 274.76 

 

Wireless Telephone Quantity Reported 59 5.02 

 Expenditures 60 $ 407.68 

 

Pager and Beepers Quantity Reported 9 4.33 

 Expenditures 9 $ 41.01 

 

Cable Modem Services Quantity Reported 14 1.21 

 Expenditures 9 $ 43.44 

 

Satellite (High-Speed) Quantity Reported 2 1.00 

 Expenditures 2 $ 65.00 

 

DSL Services Quantity Reported 13 1.46 

 Expenditures 12 $ 70.00 

 

Wireless Broadband Quantity Reported 1 1.00 

 Expenditures 0 $ 0 

 

Dial-Up Internet Services Quantity Reported 28 1.14 

 Expenditures 27 $ 29.44 

 

T-1 Services Quantity Reported 1 4.00 

 Expenditures 0 $ 0.00 

 

Other Services Expenditures 0 $ 0.00 

 
90

Appendix C

Figure C3: Average Monthly Small Business Telecommunications Use 

 Firms in the Manufacturing Industry

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 12 7.17 

 Expenditures 8 $ 183.75 

 

Long Distance (LD) Number of Lines 12 7.17 

 Expenditures 8 $ 233.13 

 

Local and LD Combined Number of Lines 12 7.17 

 Expenditures 11 $ 493.18 

 

Wireless Telephone Quantity Reported 10 3.00 

 Expenditures 11 $ 239.39 

 

Pager and Beepers Quantity Reported 2 2.00 

 Expenditures 2 $ 34.91 

 

Cable Modem Services Quantity Reported 2 1.00 

 Expenditures 1 $ 41.00 

 

Satellite (High-Speed) Quantity Reported 1 1.00 

 Expenditures 0 $ 0.00 

 

DSL Services Quantity Reported 6 1.00 

 Expenditures 4 $ 110.00 

 

Wireless Broadband Quantity Reported 1 1.00 

 Expenditures 1 $ 130.00 

 

Dial-Up Internet Services Quantity Reported 5 1.20 

 Expenditures 4 $ 21.74 

 

T-1 Services Quantity Reported 1 1.00 

 Expenditures 1 $ 39.95 

 

Other Services Expenditures 0 $ 0.00 

 
91

Appendix C

Figure C4: Average Monthly Small Business Telecommunications Use 

 Firms in the Wholesale Trade Industry

 

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 12 4.83 

 Expenditures 10 $ 229.50 

 

Long Distance (LD) Number of Lines 12 4.83 

 Expenditures 11 $ 259.55 

 

Local and LD Combined Number of Lines 12 4.83 

 Expenditures 11 $ 581.82 

 

Wireless Telephone Quantity Reported 8 2.75 

 Expenditures 9 $ 190.00 

 

Pager and Beepers Quantity Reported 1 1.00 

 Expenditures 1 $ 5.00 

 

Cable Modem Services Quantity Reported 6 2.17 

 Expenditures 5 $ 49.20 

 

Satellite (High-Speed) Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

DSL Services Quantity Reported 5 1.00 

 Expenditures 3 $ 53.33 

 

Wireless Broadband Quantity Reported 1 1.00 

 Expenditures 0 $ 0.00 

 

Dial-Up Internet Services Quantity Reported 3 1.33 

 Expenditures 4 $ 46.24 

 

T-1 Services Quantity Reported 1 1.00 

 Expenditures 1 $ 300.00 

 

Other Services Expenditures 0 $ 0.00 

 
92

Appendix C

Figure C5: Average Monthly Small Business Telecommunications Use 

Firms in the Retail Trade Industry

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 74 3.27 

 Expenditures 48 $ 154.99 

 

Long Distance (LD) Number of Lines 74 3.27 

 Expenditures 49 $ 95.82 

 

Local and LD Combined Number of Lines 74 3.27 

 Expenditures 72 $ 221.70 

 

Wireless Telephone Quantity Reported 57 2.19 

 Expenditures 57 $ 183.82 

 

Pager and Beepers Quantity Reported 1 1.00 

 Expenditures 1 $ 6.00 

 

Cable Modem Services Quantity Reported 14 1.36 

 Expenditures 11 $ 43.91 

 

Satellite (High-Speed) Quantity Reported 5 1.00 

 Expenditures 5 $ 69.99 

 

DSL Services Quantity Reported 13 1.23 

 Expenditures 8 $ 66.62 

 

Wireless Broadband Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Dial-Up Internet Services Quantity Reported 31 1.19 

 Expenditures 28 $ 24.35 

 

T-1 Services Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Other Services Expenditures 2 $ 87.50 

 
93

Appendix C

Figure C6: Average Monthly Small Business Telecommunications Use 

Firms in the Transportation and Warehousing Industry

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 9 3.33 

 Expenditures 7 $ 179.97 

 

Long Distance (LD) Number of Lines 9 3.33 

 Expenditures 7 $ 176.14 

 

Local and LD Combined Number of Lines 9 3.33 

 Expenditures 9 $ 294.20 

 

Wireless Telephone Quantity Reported 9 6.56 

 Expenditures 9 $ 371.22 

 

Pager and Beepers Quantity Reported 1 1.00 

 Expenditures 1 $ 10.00 

 

Cable Modem Services Quantity Reported 3 1.00 

 Expenditures 3 $ 28.66 

 

Satellite (High-Speed) Quantity Reported 1 1.00 

 Expenditures 1 $ 100.00 

 

DSL Services Quantity Reported 2 1.00 

 Expenditures 2 $ 40.00 

 

Wireless Broadband Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Dial-Up Internet Services Quantity Reported 3 1.33 

 Expenditures 3 $ 27.32 

 

T-1 Services Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Other Services Expenditures 0 $ 0.00 

 
94

Appendix C

Figure C7: Average Monthly Small Business Telecommunications Use 

Firms in the Information Industry

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 16 2.81 

 Expenditures 13 $ 195.62 

 

Long Distance (LD) Number of Lines 16 2.81 

 Expenditures 13 $ 93.46 

 

Local and LD Combined Number of Lines 16 2.81 

 Expenditures 14 $ 276.86 

 

Wireless Telephone Quantity Reported 13 3.00 

 Expenditures 12 $ 304.17 

 

Pager and Beepers Quantity Reported 0 0 

 Expenditures 1 $ 100.00 

 

Cable Modem Services Quantity Reported 8 1.25 

 Expenditures 6 $ 61.67 

 

Satellite (High-Speed) Quantity Reported 1 1.00 

 Expenditures 0 $ 0.00 

 

DSL Services Quantity Reported 6 1.00 

 Expenditures 4 $ 49.75 

 

Wireless Broadband Quantity Reported 3 1.00 

 Expenditures 2 $ 80.00 

 

Dial-Up Internet Services Quantity Reported 7 1.43 

 Expenditures 6 $ 84.83 

 

T-1 Services Quantity Reported 1 1.00 

 Expenditures 1 $ 1,550.00 

 

Other Services Expenditures 0 $ 0.00 

 
95

Appendix C

 Figure C8: Average Monthly Small Business Telecommunications Use 

Firms in the Finance and Insurance Industry

 

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 11 6.36 

 Expenditures 9 $ 347.56 

 

Long Distance (LD) Number of Lines 11 6.36 

 Expenditures 9 $ 1,211.67 

 

Local and LD Combined Number of Lines 11 6.36 

 Expenditures 12 $ 1,243.25 

 

Wireless Telephone Quantity Reported 8 4.75 

 Expenditures 8 $ 382.50 

 

Pager and Beepers Quantity Reported 2 1.50 

 Expenditures 1 $ 17.00 

 

Cable Modem Services Quantity Reported 6 3.00 

 Expenditures 6 $ 82.33 

 

Satellite (High-Speed) Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

DSL Services Quantity Reported 3 1.00 

 Expenditures 3 $ 48.33 

 

Wireless Broadband Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Dial-Up Internet Services Quantity Reported 3 138.67 

 Expenditures 2 $ 122.50 

 

T-1 Services Quantity Reported 3 2.67 

 Expenditures 2 $ 1,315.67 

 

Other Services Expenditures 1 $ 80.00 

 
96

Appendix C Figure C9: Average Monthly Small Business Telecommunications Use 

Firms in the Real Estate, Renting and Leasing Industries

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 22 5.14 

 Expenditures 15 $ 157.26 

 

Long Distance (LD) Number of Lines 22 5.14 

 Expenditures 15 $ 109.96 

 

Local and LD Combined Number of Lines 22 5.14 

 Expenditures 20 $ 482.67 

 

Wireless Telephone Quantity Reported 18 3.39 

 Expenditures 18 $ 206.29 

 

Pager and Beepers Quantity Reported 4 2.00 

 Expenditures 4 $ 43.13 

 

Cable Modem Services Quantity Reported 6 1.17 

 Expenditures 4 $ 51.25 

 

Satellite (High-Speed) Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

DSL Services Quantity Reported 3 1.00 

 Expenditures 2 $ 35.00 

 

Wireless Broadband Quantity Reported 3 3.00 

 Expenditures 2 $ 55.00 

 

Dial-Up Internet Services Quantity Reported 6 1.67 

 Expenditures 7 $ 34.77 

 

T-1 Services Quantity Reported 2 1.50 

 Expenditures 2 $ 450.00 

 

Other Services Expenditures 1 $ 50.00 

 
97

Appendix C

Figure C10: Average Monthly Small Business Telecommunications Use 

Professional, Scientific and Technical Industries

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 47 3.11 

 Expenditures 39 $ 147.95 

 

Long Distance (LD) Number of Lines 47 3.11 

 Expenditures 39 $ 119.82 

 

Local and LD Combined Number of Lines 47 3.11 

 Expenditures 47 $ 252.30 

 

Wireless Telephone Quantity Reported 35 2.17 

 Expenditures 37 $ 130.59 

 

Pager and Beepers Quantity Reported 2 1.00 

 Expenditures 2 $ 28.00 

 

Cable Modem Services Quantity Reported 14 1.00 

 Expenditures 11 $ 47.77 

 

Satellite (High-Speed) Quantity Reported 1 1.00 

 Expenditures 1 $ 75.00 

 

DSL Services Quantity Reported 13 1.15 

 Expenditures 12 $ 61.25 

 

Wireless Broadband Quantity Reported 2 1.00 

 Expenditures 2 $ 25.00 

 

Dial-Up Internet Services Quantity Reported 21 1.38 

 Expenditures 21 $ 26.73 

 

T-1 Services Quantity Reported 4 1.00 

 Expenditures 3 $ 148.00 

 

Other Services Expenditures 0 $ 0.00 

 
98

Appendix C

Figure C11: Average Monthly Small Business Telecommunications Use 

Administrative, Waste Mgt. And Remediation Industries

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 9 3.00 

 Expenditures 9 $ 242.44 

 

Long Distance (LD) Number of Lines 9 3.00 

 Expenditures 9 $ 246.89 

 

Local and LD Combined Number of Lines 9 3.00 

 Expenditures 11 $ 418.09 

 

Wireless Telephone Quantity Reported 6 2.67 

 Expenditures 7 $ 195.71 

 

Pager and Beepers Quantity Reported 1 1.00 

 Expenditures 1 $ 13.50 

 

Cable Modem Services Quantity Reported 5 1.60 

 Expenditures 5 $ 36.60 

 

Satellite (High-Speed) Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

DSL Services Quantity Reported 0 0 

 Expenditures 1 $ 74.95 

 

Wireless Broadband Quantity Reported 0 0 

 Expenditures - $ 0.00 

 

Dial-Up Internet Services Quantity Reported 4 1.00 

 Expenditures 4 $ 40.00 

 

T-1 Services Quantity Reported 1 1.00 

 Expenditures 1 $ 500.00 

 

Other Services Expenditures 0 $ 0.00 

 
99

Appendix C

Figure C12: Average Monthly Small Business Telecommunications Use 

Health Care and Social Assistance Industries

 

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 35 3.26 

 Expenditures 18 $ 258.33 

 

Long Distance (LD) Number of Lines 35 3.26 

 Expenditures 18 $ 148.17 

 

Local and LD Combined Number of Lines 35 3.26 

 Expenditures 32 $ 315.97 

 

Wireless Telephone Quantity Reported 16 2.06 

 Expenditures 18 $ 134.89 

 

Pager and Beepers Quantity Reported 2 1.00 

 Expenditures 3 $ 70.67 

 

Cable Modem Services Quantity Reported 8 1.00 

 Expenditures 6 $ 53.99 

 

Satellite (High-Speed) Quantity Reported 2 1.00 

 Expenditures 1 $ 60.00 

 

DSL Services Quantity Reported 5 1.20 

 Expenditures 5 $ 76.80 

 

Wireless Broadband Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Dial-Up Internet Services Quantity Reported 10 1.20 

 Expenditures 9 $ 22.77 

 

T-1 Services Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Other Services Expenditures 0 $ 0.00 

 
100

Appendix C

Figure C13: Average Monthly Small Business Telecommunications Use 

Accommodation and Food Services Industries

 

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 21 3.33 

 Expenditures 10 $ 169.00 

 

Long Distance (LD) Number of Lines 21 3.33 

 Expenditures 10 $ 77.60 

 

Local and LD Combined Number of Lines 21 3.33 

 Expenditures 20 $ 212.55 

 

Wireless Telephone Quantity Reported 13 2.15 

 Expenditures 12 $ 126.50 

 

Pager and Beepers Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Cable Modem Services Quantity Reported 7 1.29 

 Expenditures 6 $ 59.17 

 

Satellite (High-Speed) Quantity Reported 1 1.00 

 Expenditures 1 $ 30.00 

 

DSL Services Quantity Reported 4 1.00 

 Expenditures 3 $ 27.00 

 

Wireless Broadband Quantity Reported 1 1.00 

 Expenditures 1 $ 20.00 

 

Dial-Up Internet Services Quantity Reported 7 1.29 

 Expenditures 6 $ 28.17 

 

T-1 Services Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Other Services Expenditures 0 $ 0.00 

 
101

Appendix C

Figure C14: Average Monthly Small Business Telecommunications Use 

 Repair, Maint., Laundry & Personal Services

 

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 41 2.66 

 Expenditures 27 $ 135.89 

 

Long Distance (LD) Number of Lines 41 2.66 

 Expenditures 27 $ 110.20 

 

Local and LD Combined Number of Lines 41 2.66 

 Expenditures 43 $ 234.97 

 

Wireless Telephone Quantity Reported 20 3.05 

 Expenditures 23 $ 239.96 

 

Pager and Beepers Quantity Reported 0 0 

 Expenditures 1 $ 25.00 

 

Cable Modem Services Quantity Reported 8 1.63 

 Expenditures 4 $ 82.75 

 

Satellite (High-Speed) Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

DSL Services Quantity Reported 8 1.00 

 Expenditures 6 $ 68.33 

 

Wireless Broadband Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Dial-Up Internet Services Quantity Reported 20 1.10 

 Expenditures 19 $ 23.78 

 

T-1 Services Quantity Reported 1 1.00 

 Expenditures 1 $ 350.00 

 

Other Services Expenditures 0 $ 0.00 

 
102

Appendix C

Figure C15: Average Monthly Small Business Telecommunications Use 

 Education, Arts, Entertainment and Public Administration

 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 17 5.00 

 Expenditures 12 $ 205.92 

 

Long Distance (LD) Number of Lines 17 5.00 

 Expenditures 12 $ 122.92 

 

Local and LD Combined Number of Lines 17 5.00 

 Expenditures 16 $ 290.87 

 

Wireless Telephone Quantity Reported 11 4.27 

 Expenditures 11 $ 200.91 

 

Pager and Beepers Quantity Reported 1 45.00 

 Expenditures 1 $ 800.00 

 

Cable Modem Services Quantity Reported 7 1.29 

 Expenditures 5 $ 72.20 

 

Satellite (High-Speed) Quantity Reported 1 1.00 

 Expenditures 1 $ 100.00 

 

DSL Services Quantity Reported 4 1.25 

 Expenditures 2 $ 95.00 

 

Wireless Broadband Quantity Reported 0 0 

 Expenditures 0 $ 0.00 

 

Dial-Up Internet Services Quantity Reported 8 1.63 

 Expenditures 5 $ 54.00 

 

T-1 Services Quantity Reported 2 1.00 

 Expenditures 0 $ 0.00 

 

Other Services Expenditures 0 $ 0.00 

 
103

Appendix C

Figure C16: Average Monthly Small Business Telecommunications Use 

Firms in All Industries 

 

 Only Firms 

# Served Using Services

 

Local Telephone Services Number of Lines 399 3.51 

 Expenditures 272 $ 185.88 

 

Long Distance (LD) Number of Lines 399 3.51 

 Expenditures 275 $ 155.39 

 

Local and LD Combined Number of Lines 399 3.51 

 Expenditures 390 $ 314.52 

 

Wireless Telephone Quantity Reported 290 3.27 

 Expenditures 300 $ 239.37 

 

Pager and Beepers Quantity Reported 27 4.04 

 Expenditures 30 $ 65.20 

 

Cable Modem Services Quantity Reported 109 1.39 

 Expenditures 83 $ 53.38 

 

Satellite (High-Speed) Quantity Reported 16 1.06 

 Expenditures 13 $ 68.07 

 

DSL Services Quantity Reported 87 1.15 

 Expenditures 69 $ 67.84 

 

Wireless Broadband Quantity Reported 12 1.50 

 Expenditures 8 $ 58.75 

 

Dial-Up Internet Services Quantity Reported 158 3.86 

 Expenditures 147 $ 31.88 

 

T-1 Services Quantity Reported 17 1.53 

 Expenditures 12 $ 559.61 

 

Other Services Expenditures 4 $ 77.00 

 
104

Appendix D 

Comparisons of Industries by Type of Telecommunications Service 

For Only Small Businesses Using the Services Listed* 

Table D1: Local Telephone Services by Industry 

Table D2: Long Distance Services (LD) by Industry 

Table D3: Long Distance and LD Services by Industry 

Table D4: Wireless Telephone Services by Industry 

Table D5: Pager and Beeper Services by Industry 

Table D6: Cable Modem Services by Industry 

Table D7: Satellite (High-Speed) Services by Industry 

Table D8: DSL Services by Industry 

Table D9: Wireless Broadband Services by Industry 

Table D10: Dial-up Internet Services by Industry 

Table D11: T-1 Services by Industry 

Table D12: Other Services by Industry 

Table D13: All Service Expenditures by Industry 

* - These tables average results for only those all small businesses subscribing 

to the particularly telecommunications service. 
105

Appendix D

Table D1: Average Monthly Expenditures 

Local Telephone Services 

Users 

 Industry N Only 

Farming/Agriculture 5 $42.80 

Construction 40 $225.90 

Manufacturing 8 $183.75 

Wholesale Trade 10 $229.50 

Retail Trade 48 $154.99 

Transportation and Warehousing 7 $179.97 

Information Services 13 $195.62 

Finance and Insurance 9 $347.56 

Real Estate, Renting and Leasing 15 $157.26 

Professional, Scientific and Tech. 39 $147.95 

Administrative, Waste and Remediation 9 $242.44 

Education, Entertainment, Public Admin. 12 $205.92 

Health Care and Social Assistance 18 $258.33 

Accommodation and Food Services 10 $169.00 

Repair, Laundry and Personal Services 27 $135.89 

All Industries 272 $185.88 

Table D2: Average Monthly Expenditures 

Long Distance (LD) 

Users 

 Industry N Only 

Farming/Agriculture 5 $76.20 

Construction 41 $74.27 

Manufacturing 8 $233.13 

Wholesale Trade 11 $259.55 

Retail Trade 49 $95.82 

Transportation and Warehousing 7 $176.14 

Information Services 13 $93.46 

Finance and Insurance 9 $1,211.67 

Real Estate, Renting and Leasing 15 $109.96 

Professional, Scientific and Tech. 39 $119.82 

Administrative, Waste and Remediation 9 $246.89 

Education, Entertainment, Public Admin. 12 $122.92 

Health Care and Social Assistance 18 $148.17 

Accommodation and Food Services 10 $77.60 

Repair, Laundry and Personal Services 27 $110.20 

All Industries 275 $155.39 
106

Appendix D

 Table D3: Average Monthly Expenditures 

 Local and LD Combined 

 Users 

 Industry N Only 

Farming/Agriculture 8 $91.25 

Construction 60 $274.76 

Manufacturing 11 $493.18 

Wholesale Trade 11 $581.82 

Retail Trade 72 $221.70 

Transportation and Warehousing 9 $294.20 

Information Services 14 $276.86 

Finance and Insurance 12 $1,243.25 

Real Estate, Renting and Leasing 20 $482.67 

Professional, Scientific and Tech. 47 $252.30 

Administrative, Waste and Remediation 11 $418.09 

Education, Entertainment, Public Admin. 16 $290.87 

Health Care and Social Assistance 32 $315.97 

Accommodation and Food Services 20 $212.55 

Repair, Laundry and Personal Services 43 $234.97 

All Industries 390 $314.52 

 Table D4: Average Monthly Expenditures 

 Wireless Telephone 

 Users 

 Industry N Only 

Farming/Agriculture 6 $106.00 

Construction 60 $407.68 

Manufacturing 11 $239.39 

Wholesale Trade 9 $190.00 

Retail Trade 57 $183.82 

Transportation and Warehousing 9 $371.22 

Information Services 12 $304.17 

Finance and Insurance 8 $382.50 

Real Estate, Renting and Leasing 18 $206.29 

Professional, Scientific and Tech. 37 $130.59 

Administrative, Waste and Remediation 7 $195.71 

Education, Entertainment, Public Admin. 11 $200.91 

Health Care and Social Assistance 18 $134.89 

Accommodation and Food Services 12 $126.50 

Repair, Laundry and Personal Services 23 $239.96 

All Industries 300 $239.37 
107

Appendix D

 Table D5: Average Monthly Expenditures 

 Pager and Beepers 

 Users 

 Industry N Only 

Farming/Agriculture 0 $0.00 

Construction 9 $41.01 

Manufacturing 2 $34.91 

Wholesale Trade 1 $5.00 

Retail Trade 1 $6.00 

Transportation and Warehousing 1 $10.00 

Information Services 1 $100.00 

Finance and Insurance 1 $17.00 

Real Estate, Renting and Leasing 4 $43.13 

Professional, Scientific and Tech. 2 $28.00 

Administrative, Waste and Remediation 1 $13.50 

Education, Entertainment, Public Admin. 1 $800.00 

Health Care and Social Assistance 3 $70.67 

Accommodation and Food Services 0 $0.00 

Repair, Laundry and Personal Services 1 $25.00 

All Industries 30 $65.20 

 Table D6: Average Monthly Expenditures 

 Cable Modem Services 

 Users 

 Industry N Only 

Farming/Agriculture 1 $35.00 

Construction 9 $43.44 

Manufacturing 1 $41.00 

Wholesale Trade 5 $49.20 

Retail Trade 11 $43.91 

Transportation and Warehousing 3 $28.66 

Information Services 6 $61.67 

Finance and Insurance 6 $82.33 

Real Estate, Renting and Leasing 4 $51.25 

Professional, Scientific and Tech. 11 $47.77 

Administrative, Waste and Remediation 5 $36.60 

Education, Entertainment, Public Admin. 5 $72.20 

Health Care and Social Assistance 6 $53.99 

Accommodation and Food Services 6 $59.17 

Repair, Laundry and Personal Services 4 $82.75 

All Industries 83 $53.38 
108

Appendix D

 Table D7: Average Monthly Expenditures 

 Satellite (High-Speed) 

 Users 

 Industry N Only 

Farming/Agriculture 1 $40.00 

Construction 2 $65.00 

Manufacturing 0 $0.00 

Wholesale Trade 0 $0.00 

Retail Trade 5 $69.99 

Transportation and Warehousing 1 $100.00 

Information Services 0 $0.00 

Finance and Insurance 0 $0.00 

Real Estate, Renting and Leasing 0 $0.00 

Professional, Scientific and Tech. 1 $75.00 

Administrative, Waste and Remediation 0 $0.00 

Education, Entertainment, Public Admin. 1 $100.00 

Health Care and Social Assistance 1 $60.00 

Accommodation and Food Services 1 $30.00 

Repair, Laundry and Personal Services 0 $0.00 

All Industries 13 $68.07 

 Table D8: Average Monthly Expenditures 

 DSL Services 

 Users 

 Industry N Only 

Farming/Agriculture 0 $0.00 

Construction 12 $70.00 

Manufacturing 4 $110.00 

Wholesale Trade 3 $53.33 

Retail Trade 8 $66.62 

Transportation and Warehousing 2 $40.00 

Information Services 4 $49.75 

Finance and Insurance 3 $48.33 

Real Estate, Renting and Leasing 2 $35.00 

Professional, Scientific and Tech. 12 $61.25 

Administrative, Waste and Remediation 1 $74.95 

Education, Entertainment, Public Admin. 2 $95.00 

Health Care and Social Assistance 5 $76.80 

Accommodation and Food Services 3 $27.00 

Repair, Laundry and Personal Services 6 $68.33 

All Industries 69 $67.84 
109

Appendix D

 Table D9: Average Monthly Expenditures 

 Wireless Broadband 

 Users 

 Industry N Only 

Farming/Agriculture 0 $0.00 

Construction 0 $0.00 

Manufacturing 1 $130.00 

Wholesale Trade 0 $0.00 

Retail Trade 0 $0.00 

Transportation and Warehousing 0 $0.00 

Information Services 2 $80.00 

Finance and Insurance 0 $0.00 

Real Estate, Renting and Leasing 2 $55.00 

Professional, Scientific and Tech. 2 $25.00 

Administrative, Waste and Remediation 0 $0.00 

Education, Entertainment, Public Admin. 0 $0.00 

Health Care and Social Assistance 0 $0.00 

Accommodation and Food Services 1 $20.00 

Repair, Laundry and Personal Services 0 $0.00 

All Industries 8 $58.75 

 Table D10: Average Monthly Expenditures 

 Dial-Up Internet Services 

 Users 

 Industry N Only 

Farming/Agriculture 2 $20.50 

Construction 27 $29.44 

Manufacturing 4 $21.74 

Wholesale Trade 4 $46.24 

Retail Trade 28 $24.35 

Transportation and Warehousing 3 $27.32 

Information Services 6 $84.83 

Finance and Insurance 2 $122.50 

Real Estate, Renting and Leasing 7 $34.77 

Professional, Scientific and Tech. 21 $26.73 

Administrative, Waste and Remediation 4 $40.00 

Education, Entertainment, Public Admin. 5 $54.00 

Health Care and Social Assistance 9 $22.77 

Accommodation and Food Services 6 $28.17 

Repair, Laundry and Personal Services 19 $23.78 

All Industries 147 $31.88 
110

Appendix D

 Table D11: Average Monthly Expenditures 

 T-1 Services 

 Users 

 Industry N Only 

Farming/Agriculture 0 $0.00 

Construction 0 $0.00 

Manufacturing 1 $39.95 

Wholesale Trade 1 $300.00 

Retail Trade 0 $0.00 

Transportation and Warehousing 0 $0.00 

Information Services 1 $1,550.00 

Finance and Insurance 2 $1,315.67 

Real Estate, Renting and Leasing 2 $450.00 

Professional, Scientific and Tech. 3 $148.00 

Administrative, Waste and Remediation 1 $500.00 

Education, Entertainment, Public Admin. 0 $0.00 

Health Care and Social Assistance 0 $0.00 

Accommodation and Food Services 0 $0.00 

Repair, Laundry and Personal Services 1 $350.00 

All Industries 12 $559.61 

 Table D12: Average Monthly Expenditures 

 Other Services 

 Users 

 Industry N Only 

Farming/Agriculture 0 $0.00 

Construction 0 $0.00 

Manufacturing 0 $0.00 

Wholesale Trade 0 $0.00 

Retail Trade 2 $87.50 

Transportation and Warehousing 0 $0.00 

Information Services 0 $0.00 

Finance and Insurance 1 $80.00 

Real Estate, Renting and Leasing 1 $50.00 

Professional, Scientific and Tech. 0 $0.00 

Administrative, Waste and Remediation 0 $0.00 

Education, Entertainment, Public Admin. 0 $0.00 

Health Care and Social Assistance 0 $0.00 

Accommodation and Food Services 0 $0.00 

Repair, Laundry and Personal Services 0 $0.00 

All Industries 4 $77.00 
111

Appendix E

Other Supplemental Survey Information

Question #5 asked respondents to rank the importance of the following factors when they 

choose a telecommunications service provider: 

• Price 

• Quality and reliability 

• Customer service 

• Name brand 

• Choice of services and features 

• Billing accuracy and options 

• Provider’s financial stability 

• Installation and service start date 

• Recommended by others 

However, respondents were permitted the option of adding other factors, though few did. 

The following are those additional factors noted by respondents: 

• “Company phone answered by human being” 

• “Human contact” 

• “Availability” 

• “Sales rep., someone who knows us” 

• “Honesty” 

• “Social responsibility” 

• “Not have term contract (pay monthly and be able to cancel without penalty)” 

• “Service level agreement” 

• “Understandable bills” 

• “Easy to understand invoices” 

• “Moderate and predictable rate” 

• “Consistency” 

• “No telemarketing”
112

About the Author 

For over twenty years, Mr. Pociask has worked in and consulted for telecommunications 

and high-tech industries. As president of TeleNomic Research, a consulting firm 

specializing in public policy analysis for information technology industries, he is 

responsible for a wide variety of applied economic studies. A number of his studies are 

filed at both federal and state regulatory commissions, and recently have included topics 

such as rate reform, deregulation and productivity incentive plans. Mr. Pociask has 

appeared before the FCC in its open forums and at its staff meetings. He has spoken to 

numerous state and local legislators on broadband issues, and testified before the 

Congressional Subcommittee for Telecommunications, Trade and Consumer Protection 

on Internet and broadband legislation. He has written about deregulation, long-distance 

industry cost structure, local exchange competition, the economics of multimedia data 

networking and cable competition. His study, “MCI WorldCom’s Sprint Toward 

Monopoly: An Analysis of the Proposed Telecommunications Merger,” co-authored with 

Dr. Jack Rutner and sponsored by the Economic Policy Institute, accurately predicted the 

Department of Justice’s decision to block the merger. He has appeared numerous times 

in the media, including Bloomberg News, CNBC, Telecommunications Reports, 

Telephony, Congressional Quarterly, America’s Network, NetworkMagazine and CNET 

Radio. 

Mr. Pociask previously served as chief economist and executive vice president for Joel 

Popkin and Co., an economic consulting firm in Washington, DC. Before this 

assignment, he was chief economist for a major telecommunications provider. He has 

completed his Ph.D. coursework in economics and has an M.A. in economics from 

George Mason University. 

Mr. Pociask can be reached at (703) 471-3954 or Steve@TeleNomic.Com.