RAA Group

COOPERSTOWN, NY  - A new method for calculating broadband take rates reveals that demand for broadband is significantly higher than it was thought to be – a finding that changes the business case for service providers considering further buildouts.

Consulting firm Brian Webster Consulting published a revised methodology for calculating broadband take rates in the United States. Using the approach described in Webster’s new white paper, the broadband adoption rate in areas where broadband services are available is 72.9 percent, or about 10 percent higher than currently accepted industry estimates. The report has a breakdown for each state.

Based on these higher take rates, broadband deployments or expansions may be economically viable in areas once written off due to low household density. More accurate data and the ability to identify exactly where unserved homes are located leads to better-informed deployment strategies and more effective use of funding to address unserved households.

“Combining the enhanced broadband take rate with other economic data and trends as input to return-on-investment models and analysis,” notes Haig Sarkissian, principal consultant at Wireless 20/20 LLC, “builds additional confidence for investors on the merit of the broadband deployment business case.”

Brian Webster Consulting teamed with data provider Gadberry Group to design and prototype an approach that provides near address-level provision for broadband consumption and take rates.

“Earlier this year we provided several first-round [stimulus funding] applicants with block-level demographics, including consumer broadband usage,” explains Gadberry Group principal Larry Martin. “Combining these data with innovative analysis techniques has led to this new perspective on broadband take rate.”

“By leveraging our years of mapping experience, we help our clients strengthen their business case and go-to-market plans, allowing them to present their cases more clearly with images as well as with hard data,” says Brian Webster, principal consultant. “With the new insight provided by the census block take rate, business case analysis is further enhanced, thereby reducing the risk in the broadband investment and deployment.”

The complete white paper is available on the WirelessMapping Web site .

WirelessMapping.Com has been providing wireless and geospatial mapping services for seven years, both with and without accompanying demographic reports that show the number of households covered or passed. Most recently WirelessMapping has been involved in census block level mapping and demographic support services to clients developing applications to the American Recovery and Reinvestment Act (ARRA) stimulus funding through the NTIA BTOP and RUS BIP. Past and current clients include Lockheed Martin, EarthLink, Covad, Federal Engineering, Sprint PCS, ExteNet Systems, Southern California Gas and Electric, Strix, Thunder Bay Telephone Company and BroadbandCensus.com.

NORTHFIELD, MINN. (December 3, 2009) — Broadband stimulus grant applicants can cut proposal prep time, dramatically reduce their risk to challenges and create more accurate statewide broadband maps to support a national broadband strategy using the first national broadband database. BroadBand Scout℠ from data and analytics company ID Insight reports broadband connectivity and usage down to the census block, also helping broadband service providers open new markets.

BroadBand Scout provides instant access to the data required to successfully apply for grant monies from the $7.2 billion American Recovery and Reinvestment Act of 2009 broadband stimulus program. This same data also allows broadband and wireless carriers to cost-effectively target new areas for service expansion and better research competitors.

BroadBand Scout was developed by a unique analytical survey process of accessing the millions of records in ID Insight’s proprietary databases that were initially assembled to track retail activity. By combining known Internet access information with address-related data, BroadBand Scout allows clients to see connectivity and usage at the most granular level. For more information, visit www.IDInsight.com/broadband.asp.

“Communities, carriers and states have been starving for this data,” said ID Insight president Adam Elliott. “Understanding current broadband usage by geography is an ongoing need for stimulus applicants as well as for the broadband and wireless carrier community. By creating easy access to extensive data and sophisticated analytics, we see a phenomenal opportunity for service providers and communities to develop a data-driven approach to planning so they gain access to grant monies that may have otherwise been impossible to get.”

One of the biggest frustrations of stimulus grant applicants is compiling the necessary broadband usage data as required by the federal agencies awarding the funds. They are further frustrated by the difficulty in defending proposals from challengers who claim incumbents already cover the areas where applicants plan to provide broadband. With BroadBand Scout, communities and companies are able to accurately identify broadband access and usage when requesting grants from the broadband stimulus program.

ID Insight is partnering with broadband industry expert Craig Settles, president of Successful.com, to deliver professional services that assist stimulus grant applicants prepare and defend their proposals, and help state broadband mapping teams effectively execute their projects. “The key to effective broadband strategy, both locally and nationally, is to capture accurate connectivity data directly from consumers and businesses,” said Settles. “ID Insight offers an excellent combination of expediency and accuracy that broadband project leaders need.”

In October 2009, the first grant application to receive funding was for statewide broadband mapping projects to support the FCC’s efforts to develop a national broadband strategy. BroadBand Scout enables states to launch their projects faster and execute with greater accuracy to meet the FCC’s requirements. Other stimulus funding awards should be announced in January 2010. There is one additional round of stimulus funding with all funds distributed by September 30, 2010.

ID Insight is currently licensing the data and information to companies, states and communities. The data is available in reports summarized at the state, county, tract, block group or block number levels. Using its patent-pending analytics system, ID Insight can also provide case-by-case consulting services to predict additional high-potential expansion markets. Besides grant applicants, these services are valuable to broadband carriers looking for insights, validation and competitive advantage for their plans to open new markets.

Broadband Webinar
Broadband industry expert Craig Settles and ID Insight president Adam Elliott are co-hosting a free Webinar to discuss the vital role accurate broadband usage data and coverage maps play in implementing an effective national broadband strategy on Wednesday, December 16, from 4:00 to 5:00 p.m. Eastern. To register, visit https://www2.gotomeeting.com/register/212771379.

About ID Insight
ID Insight, the innovator in Access-Point Intelligence, knows more about people and their access points — physical addresses, IP addresses, phone numbers and other points where fraud occurs — than any other identity-fraud risk-assessment company. Based in Northfield, Minn., the company combines its massive collection of data on people and access points with patent-pending analytics to help companies prevent fraud, reduce costs and capture more business. ID Insight provides next-generation market research, verification, authentication, and fraud solutions to financial services companies, credit issuers, retailers, online merchants and wireless providers nationwide. For more information, visit www.IDInsight.com.

About Successful.com
Successful.com has delivered community broadband services since 2006, though it provided services to technology companies and end-user organizations beginning with its inception in 1986. Previous needs assessment clients include the City of Glendale, Calif., the Little Tokyo area of Los Angeles and several cities in Santa Clara County, Calif. For over 20 years the firm’s workshops, consulting services and books have helped government and other organizations worldwide use technology to cut costs, improve business operations and increase revenue.

NORTHFIELD, MN  – A new set of nationwide broadband maps is now available from analytics firm ID Insight. According to the company, these maps enable broadband stimulus grant applicants to cut their proposal preparation time, reduce their vulnerability to challenges and create more accurate statewide broadband maps to support a national broadband strategy. BroadBand Scout from ID Insight reports broadband connectivity and usage down to the census block, also helping broadband service providers open new markets.

BroadBand Scout provides instant access to the data required to successfully apply for grant monies from the broadband stimulus program. This data also allows broadband and wireless carriers to cost-effectively target new areas for service expansion and better research competitors.

Spinoff From Retail Databases

BroadBand Scout was developed by an analytical survey accessing the millions of records in ID Insight’s proprietary databases that were initially assembled to track retail activity. By combining known Internet access information with address-related data, BroadBand Scout allows clients to see connectivity and usage at the most granular level.

“Communities, carriers and states have been starving for this data,” says ID Insight president Adam Elliott. “Understanding current broadband usage by geography is an ongoing need for stimulus applicants as well as for the broadband and wireless carrier community. By creating easy access to extensive data and sophisticated analytics, we see a phenomenal opportunity for service providers and communities to develop a data-driven approach to planning so they gain access to grant monies that may have otherwise been impossible to get.”

One of the biggest frustrations of stimulus grant applicants is compiling the necessary broadband usage data as required by the federal agencies awarding the funds. They are further frustrated by the difficulty in defending proposals from challengers who claim incumbents already cover the areas where applicants plan to provide broadband. With BroadBand Scout, communities and companies are able to accurately identify broadband access and usage when requesting grants from the broadband stimulus program.

ID Insight is partnering with broadband industry expert Craig Settles, president of Successful.com, to deliver professional services that assist stimulus grant applicants prepare and defend their proposals, and help state broadband mapping teams effectively execute their projects. “The key to effective broadband strategy, both locally and nationally, is to capture accurate connectivity data directly from consumers and businesses,” says Settles. “ID Insight offers an excellent combination of expediency and accuracy that broadband project leaders need.”

In October 2009, the first grant application to receive funding was for statewide broadband mapping projects to support the FCC’s efforts to develop a national broadband strategy. BroadBand Scout enables states to launch their projects faster and execute with greater accuracy to meet the FCC’s requirements. Other stimulus funding awards should be announced in January 2010. There is one additional round of stimulus funding with all funds distributed by September 30, 2010.

ID Insight is currently licensing the data and information to companies, states and communities. The data is available in reports summarized at the state, county, tract, block group or block number levels. Using its patent-pending analytics system, ID Insight can also provide case-by-case consulting services to predict additional high-potential expansion markets. Besides grant applicants, these services are valuable to broadband carriers looking for insights, validation and competitive advantage for their plans to open new markets.

Several weeks ago convenience store operator 7-Eleven submitted a petition to Congress to protest the fees that credit card companies charge retailers each and every time a customer uses credit instead of cash to purchase its goods. These are known in the industry as interchange fees and according to a recent Wall Street Journal article, amounted to 1.82% of every transaction made in the U.S. in 2008.

The article also detailed that this meant $45.3 billion in additional fees for U.S. banks, 75% of which stemmed from them using the Visa and MasterCard brand names. American Express charges even higher interchange fees given it serves a higher-brow client base that many merchants like to cater to. And apparently Diner’s Club charged rates as high as 7% for the privilege of accessing its privileged members when its cards first came out on the market.

The year-over-year increase in banking fees garnered was 78% and is serving as ammo for 7-Eleven and other like-minded retailers to claim the fees are getting out of hand. Not surprisingly, the industry has countered that the average interchange fee has actually decreased in recent years and was closer to 2% back in 2005.

What Exactly is an Interchange Fee?

An interchange fee is the amount that credit (and debit) card companies charge businesses and represents a cost for accessing its vast system of cardholders and payment network that executes the transaction, starting from the store charge and ending when it shows up on the client’s statement as is paid off. Banks also earn hefty interest from consumers that rack up credit card debt and is not a cost born by merchants.

Letting banks and other credit card issuers take on credit risk (risk of nonpayment) is a definite perk for retailers, the majority of which don’t offer in house credit programs themselves. It also makes payment much easier for consumers and allows them more flexible payment options (e.g. pay off the balance with one payment at the end of the month, pay it off over time with credit, or pay-as-you-go with a debit card). Another key perk is a points program that allows a card holder to receive 1% of all purchases back in the form of points that can be used to buy plane tickets, other merchandise, etc.

The Merchant Foots the Bill

The benefits offer sweet deals for credit card companies and consumers but it is merchants that must foot the bill. The fees also loom large for many retailers as they already operate with razor-thin profit margins. For instance, many mom-and-pop gas stations lacking 7-Eleven’s purchasing clout have gone out of business in the past couple of years on the combination of credit card fees and gasoline profit margins that evaporated along with record-high oil prices.

The Bottom Line

The good news for merchants is that current industry sentiment favors taking a closer look at interchange fees. Europe and Australia already regulate these fees to keep them between 0.3% and 0.4%. They are unlikely to fall this low any time soon in the U.S., but the downward pressure on interchange fees isn’t going away any time soon.

What’s Your Rate?

Short Answer — Interchange + 50 Basis Points + 5 Cents

When I started in the merchant account business over 20 years ago and a prospective merchant asked “What’s your rate?” it was easy to simply quote 1.69 % + 20 cents, take out my pen, and start writing up the paperwork. Wow has that changed. Over the past two decades MasterCard and Visa, in their infinite wisdom, has developed a daunting list of interchange rules based upon your type of business, what type of card is presented by the consumer, the amount of the sale, what type of data you enter into your terminal or software, and if you swipe or manually key in the sale. In the 1980’s I could count on one hand the number of different interchange categories while today the list is over 100 pages long. Up until recently interchange was a trade secret guarded like the recipe for Coke but now it is publicly posted on Visa and MasterCard’s corporate websites.

It is important to know that every merchant account provider is bound by the exact same interchange schedule. It is the markup from this schedule that determines what you will ultimately pay. There is no such thing as wholesale rates, not even for the largest retailers. So when today a sales rep quotes you a tiered rate such as 1.69 % you really have to ask for the rest of the picture as very few of your transactions will qualify for that rate. As you can see from the chart below interchange cost for almost every category is higher including all rewards cards, business type cards and keyed cards. Therefore only swiped debit/check cards and small ticket (Under $15) sales in a limited number of business types have an actual cost lower than 1.69 %. In this example one could expect that most sales would be downgraded to a mid-qualified or non-qualified rate which usually adds 1 to 2 % to the qualified rate.

OK, so why do we have rates on our site similar to the 1.69 % example. The reason is because it has been so embedded in merchant’s minds over the years to just say “What’s your rate?” that it would be foolish for us to not at least offer this popular option. However, the educated merchant (which we want you to be), including most every large merchant knows that the least expensive option is Interchange Plus pricing. That is why Credit Card Processing Services offers all of our merchants either tiered pricing or the following low cost interchange plus pricing schedule.

CATEGORY	INTERCHANGE	ADD 30 BP + 10 Cents	YOUR RATE
Visa Check Cards
CPS Hotel – Debit Cards	1.46 % + $0.15	Add 30 BP + 10 Cents	1.76 % + $0.25
Visa Credit Cards
CPS Hotel – Credit Cards	1.68 % + $0.10	Add 30 BP + 10 Cents	1.98 % + $0.20
CPS Rewards 2 T&E	2.00 % + $0.10	Add 30 BP + 10 Cents	2.30 % + $0.20
Signature Card Electronic	2.40 % + $0.10	Add 30 BP + 10 Cents	2.70 % + $0.20
Visa Commercial Cards
Business Card Electronic	2.50 % + $0.10	Add 30 BP + 10 Cents	2.80 % + $0.20
Corporate Card Electronic	2.30 % + $0.10	Add 30 BP + 10 Cents	2.60 % + $0.20
MasterCard Offline Debit Cards
Merit 3 – Debit Cards	1.15 % + $0.15	Add 30 BP + 10 Cents	1.45 % + $0.25
MasterCard Credit Cards
Merit 3 – Credit Cards	1.68 % + $0.10	Add 30 BP + 10 Cents	1.98 % + $0.20
MasterCard World & Elite Cards
World Card T&E	2.40 % + $0.10	Add 30 BP + 10 Cents	2.70 % + $0.20
World Elite Card T&E	2.85 % + $0.10	Add 30 BP + 10 Cents	3.15 % + $0.20
MasterCard Corporate & Business
Face-to-Face Corporate Cards	2.15 % + $0.10	Add 30 BP + 10 Cents	2.45 % + $0.20
Face-to-Face Business Cards	2.42 % + $0.10	Add 30 BP + 10 Cents	2.72 % + $0.20
World & World Elite Business T&E	2.60 % + $0.00	Add 30 BP + 10 Cents	2.90 % + $0.10
Diners Club Electronic	2.10 % + $0.00	Add 30 BP + 10 Cents	2.40 % + $0.10
Discover
Hotel – Debit Cards	1.45 % + $0.10	Add 30 BP + 10 Cents	1.75 % + $0.20
Hotel – Credit Cards	1.81 % + $0.10	Add 30 BP + 10 Cents	2.11 % + $0.20
Hotel – Premium Cards	2.40 % + $0.10	Add 30 BP + 10 Cents	2.70 % + $0.20
Interchange Rates already include Dues and Assessments which we have rounded off to 10 BP
Interchange Plus Pricing available for all lodging properties processing at least $10,000 per month in volume
Visa Dues and Assessments are .0925%
MasterCard Dues and Assessments are .0950%
Discover Dues and Assessments are .0950%
Interchange Table Current as of June 2009

[12:00:00 AM Saturday, October 31, 2009]

Controversies Surround Credit Card Interchange Fees

Some victims of interchange fees demonstrated in the grounds of the U.S. Capitol. These interchange fees are the amount which the customer pays to the banks and card networks. The protesters are calling the government to limit these fees.

Credit card interchange fees have increased in recent years. There were bills passed to limit these fees. Now merchants can collect lower fees from the credit card companies and they are also permitted to give discounts to their customers when they will pay in cash.

However some big companies said that interchange fees are needed for the funding of electronic payments innovation that could give more convenience to their customers. But as a customer you should know these myths about interchange fees.

The first myth is merchants are using interchange fees to get more money. This is not true because the real people who benefit from the increasing interchange fees are the banks. As Zoe Lofgren said, banks are greedy. The very large companies are posting higher interchange fees to gain more profits.

Some credit cards companies can also be blamed. Interchange fees solicited were used to pay pieces of junk mails. However, credit card experts that this activity is not acceptable. A credit card expert says that there is no correlation of the interchange fee and the numbers of mailings the customers get.

The intense competitions among the card companies drive the interchange fees to get high.

So interchange fees are often used to fund the rewards programs that come with certain cards.

It is more expensive for small neighborhood banks and credit unions, for example, to provide credit transactions because they get fees from much fewer transactions than the big banks.

The second myth is that people know where their savings go if the interchange fees are regulated. Some form of arguments said that lower fees are the only means of getting more from the customers. Last 2002, the Reserve Bank of Australia applied a cap on interchange fees and also allowed stores to surcharge customers who use cards-policies similar to what is being considered in the United States. The U.S. Government Accountability Office however found out that no evidence supports that lower interchange fees can reduce retail prices.

The third myth about the interchange fees is that limiting fees is the only answer. There are still burdens that can arise without directly prohibiting fees over certain levels. There should be transparency between the credit card issuers and merchants about their payment agreements.

Currently, when a business owner signs an agreement to be able to use credit card payment in his or her store, the agreement restricts the owner from disclosing the size of the fee or from giving a discount to customers who pay in cash.

There was a bill proposed by Peter Welch, Congressman from Vermont that would let credit card companies to reveal their interchange rates and terms to their customers. It would allow great flexibility in business pricing.

Such a change, however, wouldn’t do much to benefit customers who like to keep cash to a minimum. But it’s not just Washington that could do something to reduce the burden of interchange fees. States and localities could do it too.

Credit Card News: Controversies Surround Credit Card Interchange Fees

Who’s Who? What’s What? What’s Real In An Internet world?

December 1, 2009 ·

The New Yorker published a cartoon in 1993 which shows a dog sitting at a computer terminal saying to another dog, “On the Internet, nobody knows you’re a dog.”  A few years ago, I went to a talk given by one of the computer graphics experts who worked on Jurassic Park.  He was describing how they created many of the dinosaurs in the movie completely by computer.  He went on to say that within a decade, they will be able to create human beings on film completely by computer without any need for actors.  The power of Photoshop to recreate photographic reality is seen as magazines are caught digitally manipulating photos to meet their needs.

Over 15 years after the original New Yorker cartoon, there is still no widely deployed mechanism for verifying the identity of anyone or authenticity of anything found on the web.  As the web becomes the primary source of information for more and more of the world’s populace, it becomes harder and harder to discern truth from fiction.  The question is, “How do you know who to trust?”

Over time, as technology has evolved, new trust models have been developed to keep up.

• Recommendations through friends – This is perhaps the oldest method of establishing trust.  You simply ask someone you trust for a recommendation, e.g. you move to a new city and ask a colleague to recommend a doctor or attorney.  You believe a story because someone you know and trust tells it to you.
• Recommendations through trusted third parties – Restaurant, movie, or wine reviews in a newspaper are examples of this model.  Because you trust the judgment of the reviewer you trust their recommendations.  Gartner reports on IT products and vendors, and their ratings of consulting firms are an example of how effective this can be.
• Process creates trust – Traditional journalism requires the validation of a story from more than one source.  You believe what you read in the New York Times because you trust the vetting process they use before they print a story.  Wikipedia is also an example of this trust model.  You trust the contents of Wikipedia because you believe that the “crowd sourcing” process used is effective.
• Community ratings – Zagat guides demonstrate the effectiveness of this approach.   Rather than depending on a single trusted 3^rd party, you simply aggregate the opinions of a large number of people and use that as a recommendation.  Based on their success with restaurants, Zagat has extended their model to hotels, nightlife, movies, music and now even dating (& dumping).  This model has been dramatically extended on the Web to everything from local repair people to attorneys and doctors.
• Reputation systems – eBay’s trust model is perhaps the most novel.  With most eBay transactions, an auction winner sends payment to a completely unknown seller when the auction completes.  The seller then ships the product to the winner.  There is no formal recourse if the product does not meet the buyer’s expectations or even to complain if the seller never ships the product at all.  Within eBay, there is a system of community reputation in which buyers rate sellers.  For a prospective buyer, a seller with a high reputation score has lots of satisfied customers and therefore can be trusted.

However, as web information continues to explode and search engines now provide results which include Twitter and Facebook, clearly a new trust model is needed.  Recently David Pogue, the respected New York Times columnist, was accused of a conflict of interest by a number of Twitter posters.  One such Twitter post was from a Twitter user with the name “John C. Dvorak”, which also happens to be the name of another well respected computer journalist.  David Pogue gave an interview about the incident and took John Dvorak to task for his Twitter posts.  Unfortunately, the Twitter poster was not the computer journalist John C. Dvorak but someone else with the same name.  The journalist actually posts under the Twitter name “TheRealDvorak” and had made no comment at all about Pogue.  In this case even Pogue, an experienced New Times Reporter, didn’t realize he had mistakenly assumed he knew who the post was from.

Twitter has responded to the growing problem of mistaken identity by providing a program which tries to verify the identity of some Twitter users.   Unfortunately, the program is limited to a very small number of celebrities, and given the rate at which Twitter is growing and the company’s limited resources, this problem will likely grow as more and more people believe what they read on Twitter.

Solving this problem is one of the great challenges which will require significant new innovations to solve.  If you can’t tell who’s who, or what’s what on the internet, its value as an information repository will start to diminish.

Author: Sheldon Laube, Chief Innovation Officer