Bill & Melinda Gates Foundation

Dissolving the Digital Divide

March 26, 2013

This is an abridged and updated version of an article published in The New York Times in December 2011, The New Digital Divide.

Communications, which in theory should bind us together, has often divided us in practice. Until the late twentieth century, this communications divide split those with telephone access and those without. Then it was the World Wide Web: in 1995 the Commerce Department published its first look at the “digital divide,” finding stark racial, economic, and geographic gaps between those who could get online and those who could not.

“While a standard telephone line can be an individual’s pathway to the riches of the Information Age,” the report said, “a personal computer and modem are rapidly becoming the keys to the vault.” If you were white, middle-class and urban, the Internet was opening untold doors of information and opportunity. If you were poor, rural or a member of a minority group, you were fast being left behind.

Over the last decade, cheap Web access over phone lines brought millions to the Internet. But in recent years the emergence of services like video-on-demand, online medicine and Internet classrooms have redefined the state of the art: they require reliable, truly high-speed connections, the kind available almost exclusively from the nation’s small number of very powerful cable companies. Such access means expensive contracts, which many Americans simply cannot afford.

While we still talk about “the” Internet, we increasingly have two separate access marketplaces: high-speed wired and second-class wireless. High-speed access is a superhighway for those who can afford it, while racial minorities and poorer and rural Americans make do with a bike path. And this inequality is increasing.

 The new digital divide raises important questions about social equity in an information-driven world. But it is also a matter of protecting our economic future.

Just over 200 million Americans have high-speed, wired Internet access at home, and almost two-thirds of them get it through their local cable company. These customers are the targets for the next generation of Internet services, technology that will greatly enhance their careers, education and quality of life.

Within a decade, patients at home will be able to speak with their doctors online and thus get access to lower-cost, higher-quality care. High-speed connections already allow for distance education through real-time videoconferencing; thousands of high school students are earning diplomas by way of virtual classrooms.

Households will soon be able to monitor their energy use via smart-grid technology to keep costs and carbon dioxide emissions down. Even the way that wired America works will change: many job applications are already possible only online; soon, job interviews and doctors' appointments will be held by way of videoconference, saving cost and time.

But the rest of America will most likely be left out of all this.

Millions are still offline completely, while others can afford only connections over their phone lines or via wireless smartphones. They can thus expect lower-quality health services, career opportunities, education, employment, and entertainment options than other Americans.

True, Americans of all stripes are adopting smartphones at breakneck speeds; in just over five years the number has jumped to about 46 percent; among Hispanics and African-Americans, it’s 49 percent.

Most of the time, smartphone owners also have wired access at home: recent research shows that more than 83 percent  of smartphone users fall into this category. Users relying on smartphone access as their only connection to the Internet are at least twice as likely to be members of minority groups or members of low-income households compared to the smartphone population as a whole.

Wired access is strongly correlated with income level. According to numbers released in late 2011 by the Department of Commerce, a mere 4 out of every 10 households with annual household incomes below $25,000 in 2010 reported having wired Internet access at home, compared with the vast majority — 93 percent — of households with incomes exceeding $100,000.

There is also a racial and ethnic disparity as well. Only slightly more than half of all African-American and Hispanic households (55 percent and 57 percent, respectively) have wired Internet access at home, compared with 72 percent of whites.

These differences are likely to grow even sharper as the 30 percent of Americans without any kind of Internet access come online. When they do, particularly if the next several years continue to deliver subpar growth in personal income, they will probably go for the only option that is at all within their reach: wireless smartphones.

The problem is that smartphone access is not a substitute for wired. Even if a smartphone connection had the technical potential to compete with a slow wired connection, users would still be hampered by the monthly data caps put in place by AT&T and Verizon, by far the largest wireless carriers in America.

For example, well before finishing the download of a single two-hour, high-definition movie from iTunes over a 4G wireless network, a typical subscriber would hit his or her monthly cap and start incurring $10 per gigabyte in overage charges. If you think this is a frivolous concern, for “movie” insert an equally large data stream, like “business meeting.”

Capacity as well as speed matters. Demonstrating that wireless does not compete with a wire, Verizon Wireless and the cable companies have joined forces to market their services together.

Public libraries are taking up the slack and buckling under the strain.

Nearly half of librarians say that their connections are insufficient to meet patrons’ needs. Even worse, sequestration will cut an estimated $19 million of public library funding at a time when many Americans rely on libraries for Internet access. The Pew Internet and American Life Project recently reported 26 percent  of Americans depend on Internet access at libraries.[1]

In the past, the cost of new technologies has dropped over time, but there is reason to believe this time is different. Today, the problem is about affording unregulated high-speed Internet service — provided, in the case of cable, by a few for-profit companies with very little local competition and almost no check on their prices. They have no incentive to expand into rural areas, where potential customers are relatively few and far between.

The bigger problem is the lack of competition in cable markets. Though there are several large cable companies nationwide, each dominates its own fragmented kingdom of local markets: Comcast is the only game in Philadelphia, while Time Warner dominates Cleveland. That is partly because it is so expensive to lay down the physical cables, and companies, having paid for those networks, guard them jealously, clustering their operations and spending tens of millions of dollars to lobby against laws that might permit competitors overseen by municipalities to build better networks.

Cable’s only real competition comes from Verizon’s FiOS fiber-optic service, but FiOS is available to only about 10 percent of households - and covers just 15% of Comcast's footprint and 11% of Time Warner Cable's. (AT&T’s U-verse, which has about 4 percent of the market, cannot provide comparable speeds because, while it uses fiber-optic cable to reach neighborhoods, the signal switches to slower copper lines to connect to houses.) Lacking competition from other cable companies or alternate delivery technologies, each of the country’s large cable distributors has the ability to raise prices in its region for high-speed Internet services.

It doesn’t have to be this way, as a growing number of countries demonstrate.

People in places like Seoul, Paris, and Amsterdam pay only $35-$45 for speeds that are much faster than those for which we pay $100-$150 per month.  And 2012 data from the Organization for Economic Cooperation and Development (OECD) shows that people in the U.S. pay at least $1.10 per Mbps, where people in South Korea pay $.21 per Mbps.

America, the country that invented the Internet and still leads the world in communications innovation, is lagging far behind in actual use of that technology.

The answer to this puzzle is regulatory policy. Over the last 10 years, we have deregulated high-speed Internet access in the hope that competition among providers would protect consumers. The result? We now have neither a functioning competitive market for high-speed wired Internet access nor government oversight.

By contrast, governments that have intervened in high-speed Internet markets have seen higher numbers of people adopting the technology, doing so earlier and at lower subscription charges. Many of these countries have required telecommunications providers to sell access to parts of their networks to competitors at regulated rates, so that competition can lower prices.

Meanwhile, they are working toward, or already have, fiber-optic networks that will be inexpensive, standardized, ubiquitous and equally fast for uploading and downloading.

The new digital divide raises important questions about social equity in an information-driven world. But it is also a matter of protecting our economic future. Thirty years from now, African-Americans and Latinos, who are at the greatest risk of being left behind in the Internet revolution, will be more than half of our work force.

If we want to be competitive in the global economy, we need to make sure every American has world-class high-speed wired access to the Internet at a reasonable cost. 

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