Government Adoption of Digital Communication Networks is Slow, but will be Sizeable

  • For some time now, we have been advancing the position that Federal, State and Local governments represent a huge opportunity for firms involved in the Digital Communication Network ("DCN") industry. This opinion was predicated upon the many benefits to be derived by a governmental agency from a DCN, the size and scope of this potential market, and activities being undertaken by the United States Postal Service, among others. Despite slow adoption rates and a general lack of interest (or money) by many of these agencies, we continue to believe that this market will evolve in time.
  • The benefits of deploying a DCN in a government environment are well-known. Reduced wait-time perceptions, enhanced service levels and increased employee productivity due to functional and form readiness and related messaging, as well as directional messages. Service sales (i.e., buy a vanity license plate) are further applications that should make a DCN appealing to most governmental agencies.
  • While it is difficult to quantify the US DCN market for government investment, we believe that it will be huge. Consider, for example, that according to the 2006 Statistical Abstract of the United States, in 2004 the Federal government owned 411,406 buildings encompassing 2.9 million square feet, and leased an additional 45,000 buildings. The IRS has eight public locations in the State of Illinois. And the New York Department of Motor Vehicles has ten offices alone in the New York City area just for the resolution of moving violations. If even a fraction of these sites installed a DCN, the market would be significant.
  • Notwithstanding our thoughts on the benefits and size of this market, attendance at a series of DCN seminars at a recent government technology conference we coordinated was disappointing. We were planning for over 500, but ended up with substantially less than that. While at this conference, I meet with an IT professional from Edwards Air Force Base. He runs a network of 400 screens. The South African Post Office is said to be installed at over 100 locations. Many of the UK non-royal Post Offices are already networked. And other Post Offices around the world are also looking into DCN. Thus, it is not, in our view, a matter of if, but rather when other agencies begin to recognize the merits to be derived from a DCN.
  • The government market will be slow to evolve. But once it does, the revenue opportunity for DCN providers will be outstanding.

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