the public policy debate over America's "digital divide"
intensifies, federal, state and local policymakers are considering
steps to solve this apparent gap between the technological "haves"
and "have-nots." The issue has two major policy components. The
first deals with the "wiring" of classrooms for educational
purposes and the role of technology in educating children in
general. The second deals with the wiring of American homes to
ensure that all citizens have personal computers (PCs) and are
connected to the Internet. It is the latter that is creating the
Using heated rhetoric, policymakers in the
Clinton Administration and in Congress are calling for the creation
of new federal entitlements to address what some perceive as a
national civil rights crisis. As Eric Cohen, managing editor of
The Public Interest, noted in a recent issue of The
Weekly Standard, "The digital divide is now the hottest social
policy issue in Washington, It's the 'new new thing' in civil
rights politics." Dozens of national solutions
to this supposed crisis have been proposed in recent months.
example, the Clinton Administration has proposed a wide variety of
new federal programs and over $2 billion in new spending
initiatives in its fiscal year (FY) 2001 budget. Vice President Al Gore has
floated a package of proposals, while Members of Congress
debate a variety of proposals ranging from tax credits for the
donation of computers to needy schools or individuals to the
creation of new federal programs. One proposal would provide direct
tax credits of up to $500 to subsidize the purchase of a new PC
system by low-income families. Another would create a New
Deal-type program resembling the Rural Electrification
Administration, providing $3 billion in low-interest loans to
companies to deploy high-speed broadband networks to rural or
remote sections of America.
Before policymakers make rash decisions on
these proposals or create an expensive new government program to
address America's supposed digital divide, they would be wise to
take a closer look at the current market for personal computers and
Internet access. Americans live in an age of technological
abundance, with a virtual digital deluge of opportunity. Free
computers and free Internet access are helping to filling the
digital gap. Clearly, the vibrant PC market is doing more than an
adequate job of speeding computing technology to every
IS THERE A DIGITAL DIVIDE?
Proponents of new programs and spending
initiatives to address America's supposed digital divide have
articulated their concerns in divisive and quite extreme terms.
NAACP President Kweisi Mfume, for example, has referred to the
issue as "technological segregation," and the Reverend Jesse
Jackson has said the digital divide represents "classic
apartheid." Not surprisingly,
politically charged claims such as these led President Bill Clinton
to hold a recent digital divide summit, at which he called for over
400 companies and non-profit organizations to sign a "National Call
to Action to Bring Digital Opportunity to Youth, Families, and
Regrettably, these claims and actions
assume that a genuine "digital divide" crisis exists in America
that demands a national solution and expensive federal entitlement
programs. Before policymakers make rash decisions on this issue,
they should consider the following evidence:
PCs are becoming more
PC prices have fallen steadily over the past 15 years. In fact,
Internet-ready PCs are available from major retailers, catalogue
companies, and online vendors for less than $400 and, in some
cases, under $300. More important, the quality-adjusted price of
these systems--their real cost adjusted for technological
improvements and increased service options--has fallen even
PC systems are being given
Many companies are giving away PCs virtually free of charge in
exchange for nominal monthly fees and/or long-term service
agreements. Today, these systems--which typically include a
monitor, keyboard, speakers, a modem, and Internet access--cost
consumers only between $21 and $29 a month.
Some PCs are cheaper to buy than
Prices in the PC market have fallen so rapidly, in fact, that it is
not uncommon to find new computer systems that are cheaper than new
TVs. This begs an obvious question: If Americans can purchase an
Internet-ready PC for less than the cost of a new television set,
just how real is the digital divide? After all, according to the
U.S. Department of Energy, 98.7 percent of all Americans--including
97.3 percent of all poor households--own a television set. If
virtually every American household can own a TV, which usually is
more expensive than an entry-level PC system, then the need to
create an expensive new entitlement program for PCs is dubious.
Internet access is cheap, and often
Free Internet access regularly is offered by advertising-supported
Internet service providers (ISPs), which means consumers who
already own a PC can sign up for Internet service for no additional
Many companies offer free computing
Other free computing and Internet services are becoming available.
For example, free e-mail services are ubiquitous on the World Wide
Web. Additionally, consumers have access to free storage sites on
the Internet to save large amounts of information or files on
independent company servers and hard drives. This means consumers
do not necessarily need to purchase a hard drive of their own to
store their files. Also consumers can access many free software and
technical support sites.
Emerging hybrid computing systems may
soon make PCs irrelevant.
Thanks to the existence of so many free Internet services,
consumers increasingly are obtaining new hybrid systems known as
"Internet appliances" or "dumb terminals" that offer instantaneous
Internet access without requiring the purchase of a hard drive. For
as little as $99, consumers can purchase a keyboard and monitor
with built-in Internet software for direct access to the Web.
Finally, hand-held PC devices are becoming increasingly popular,
offering another inexpensive technology that could one day be as
ubiquitous as cellular phones.
Companies are rushing to deploy
state-of-the-art broadband networks to the home.
Telecommunications network providers are rushing to provide
consumers a variety of technological options for accessing the
Internet and online networks in general. For example, high-speed
digital subscriber line (DSL) systems are being rolled out by
telephone companies, and cable firms are deploying modems to offer
fast Internet access through their cable systems. More important,
"wireless Internet" technologies are emerging that offer access
without a physical wire running into the home, which will make
Internet access more available to many more Americans in the very
Employers increasingly offer free or
subsidized PCs to their employees.
Many large private-sector companies are now offering their
employees subsidized PCs and free Internet access. Ford Motor
Company, Delta Air Lines, American Airlines, and Intel Corporation,
for example, recently announced plans to offer these services to
their combined 604,000 employees. This new workplace benefit is
likely to become more prevalent as employers compete for quality
- Free markets are spreading new
technologies more quickly than subsidies.
Personal computers and Internet services have spread quite rapidly
throughout society. As Helen Chaney of the Pacific Research
Internet access has spread to 50 million
people in only four years. That's about nine times faster than
radio, four times faster than the personal computer and three times
faster than television. At this rate, it won't be long until all of
those who desire Internet access will have it.
facts clearly call into question the presence of a significant
digital divide in America and the extent to which it demands any
national solution or federal entitlement. The marketplace is doing
more than an adequate job of providing computing technologies to
Americans. Federal policymakers should be wary of interfering with
this spontaneous and vibrant process.
COMPUTER PRICES AND PROCESSING POWER
history of the computer industry and the Internet in America is one
of the most exciting stories of free-market opportunity and
entrepreneurial success. It is filled with cases of rapidly falling
prices and rapidly improving innovation. Year after year, the
prices of personal computers fall. In fact, according to PC Data,
Inc., a research firm based in Reston, Virginia, the average cost
of a new PC fell from $1,434 in 1997 to $916 in 1999. Moreover, as
the information in Table 1 illustrates, any consumer in America can
find an inexpensive PC or laptop computer today by searching
online, visiting an electronics retailer, or picking up a catalogue
and ordering over the phone.
Average Price of
"Base Model" PCs
Has Dropped Steadily
|Source: PC Data, Inc, 2000
But what this snapshot of the market also
illustrates is that, over time, the quality-adjusted price of
personal computers (their actual costs adjusted for technological
improvements and increased service options) plummeted even faster
than the list prices suggest. That is, not only has the average
cost for a PC dropped dramatically over the past 10 to 15 years,
but in each of these years, the processing power of these systems
grew exponentially, making their quality-adjusted price even
phenomenon is known in the computer industry as Moore's Law. Named
after Intel Corporation co-founder Gordon Moore, this principle
holds that the computing power of a microprocessor doubles roughly
every 18 months. As Chart 1 shows, processing power--traditionally
measured in how many millions of instructions per second (MIPS) a
transistor chip can execute--has grown dramatically over the past
10 years. Meanwhile, the price of the average transistor, measured
in terms of cost per unit of computing power, has fallen by an
equally dramatic margin.
result of this market process has been the rapid deployment of less
expensive but more technologically sophisticated personal computer
systems. The powerful relationship expressed by Moore's Law means
that yesterday's premium system quickly becomes today's
run-of-the-mill system. Likewise, today's cutting-edge PC will
become tomorrow's "bare bones" entry-level system.
fact, to the extent computer consumers bemoan the current state of
the PC market, it is not that they cannot purchase the PC they want
at a good price; it is the fact that a cheaper but more powerful
system came along that makes their newly purchased system appear
outdated. Despite these consumer complaints, it is clear that PC
prices continue to fall rapidly while the quality of the systems is
increasing. This is the sign of a healthy, competitive, and
consumer-friendly market at work.
Free PCs and Disposable Computing
PC prices falling so rapidly throughout the 1990s, it was only a
matter of time until the "free PC" era dawned. That is, as the
quality-adjusted price of PCs plummeted each year, companies became
more competitive and eventually began giving away their PC systems
to consumers for little or no up-front charge, in return for
monthly service contracts. The existence of this trend was perhaps
most fittingly captured by a headline on the cover of the March
2000 edition of Computer Shopper magazine: "FREE PCs: How to
Choose the Best Deal!" The feature story compared six different
Internet-ready PC systems that consumers could order directly
through the mail or purchase from a retail electronics store.
Table 2 compares these six PCs. Each system
includes a monitor, keyboard, a CD-ROM drive, speakers, and a modem
for accessing the Internet. Technical support is included with each
system, often free of charge. Finally, a package of software, such
as Microsoft Works Suite 99 or Corel WordPerfect Suite 8, comes
bundled in each system.
These "free PCs" are not entirely free, of
course. Consumers must pay a shipping charge for delivery to their
homes or a small charge if the system is purchased at a retail
store, and then use the manufacturers' rebates or other special
offers to bring the cost back down. Once they have the systems in
their homes, consumers are charged a small monthly fee ranging
between $21.08 to $29.99 for the ISP contract. The length of the
contract is typically three years.
the "free PC" era now in full swing, it would seem that there is
little reason to create a national computer entitlement program.
Americans can own an entry-level, Internet-ready PC without
spending much money. Some critics claim, however, that free PCs
really are not free; consumers might pay less (or nothing) up front
for these systems, but they are required to enter into a long-term
contract with a computer company or ISP, and pay a low monthly
fixed fee for continued service to amortize the complete cost of
There is some truth to this contention.
Even if the government promised free computers to every American,
someone would end up footing the bill for the program in the form
of higher taxes or cross-subsidies within the industry.
fact is, even if obtaining the "free PCs" requires some minimal fee
to lease a system for an extended period of time, Americans would
still be able to afford these systems. Skeptics who argue otherwise
should consider: How is it that the average television set today
costs more than an entry-level PC, yet according to the federal
government's own data, almost every American home has a
According to the 1997 Residential Energy
Consumption Survey, conducted by the Energy Information
Administration of the U.S. Department of Energy, 98.7 percent of
all Americans households own a television set. It is not just
wealthy or middle-class Americans who are lucky enough to have a
television in their home. According to the survey, 97.3 percent of
all poor households have a color television set.
simple comparison helps make the point. A March 2000 Heritage
Foundation survey of the Web sites of three popular national retail
chains--Best Buy, Circuit City, and WalMart--found that a new
25"-27" television set cost an average of approximately $332, while
a new 32"-36" set cost an average of about $774. (See Table 3.)
Meanwhile, as the data in Table 1 show, a budget, entry-level
personal computer purchased at a retail chain or through a
catalogue or Internet vendor is generally comparable in cost, or
even less expensive, than a new television. Consumers have had
little problem purchasing television sets. And no federal
assistance programs exists to help poor households to do so.
Often, consumers will defer the up-front
cost of a new television by signing a monthly installment plan to
amortize the cost of the set over several years. This is
essentially the payment arrangement many "free PC" suppliers
provide. The monthly charge for a new PC typically is less than the
monthly fee to finance the cost of a new TV. Moreover, consumers
who choose the monthly repayment option on the purchase of a
television through a major retail outlet often must use the
company's store credit card to do so, adding interest charges to
their cost. This is not typically the case with "free PCs."
Thus, as the cost of the average
entry-level personal computer continues to fall well below that of
the average television set, American households should have fewer
problems affording new computers.
What About Internet Access?
after considering the many amazing bargains available for consumers
who want to buy a personal computer, a skeptic still could ask:
What good is a computer without access to the Internet? After all,
a good part of the debate over the "digital divide" has to do with
use of the Internet as a means of societal empowerment.
Fortunately, this is not a problem.
Americans already enjoy flat rate access and very inexpensive
buffet-style pricing for Internet access. For example, monthly
Internet access plans run as little as $9.99 to $19.99 a month. And
some free-PC packages include Internet access for a flat monthly
Increasingly, Internet access is being offered
free-of-charge by advertiser-supported Web sites. In fact, one
Internet Web site, "The Free ISP Internet Access Network" (at )
compiles and critiques many of the existing free Internet access
service providers. And, a quick Internet search for free Internet
access reveals many companies and Web sites that are willing to
provide consumers with free monthly Internet access. (See Table 4.)
Most of these ISPs are able to provide free access because they are
of these free ISPs is the San Francisco-based "," a partnership between popular retailer Kmart
and Softbank Venture Capital. It took its name from Kmart's famous
"blue light specials" that offer in-store customers instant
bargains in a specific aisle of the store, which are found under a
blue flashing light. Another, "NetZero," with over 3 million users,
ranks in the top tier of national ISPs. Finally, the "Free-N-Safe"
site bills itself as "family friendly," because in addition to free
access, it blocks objectionable material, such as pornography, hate
sites, and violent sites.
New York Times reporter Laurie J. Flynn notes, "it [is]
clear that the free-access movement is a trend." And just as the free PC
movement has benefited consumers, the free-access trend will do the
It is not just PCs and Internet access that are
being given away free to consumers. The cover story in the April
2000 edition of PC World magazine, entitled "Best Free Stuff
Online," featured dozens of computing services that are offered to
the public free-of-charge. For example, free technical
support sites are growing in number on the Internet, and offer
assistance to computer users who are having hardware or software
problems. (See Table 5.)
addition, free file storage space and file backup technologies are
offered on various sites, which allow consumers to store data or
share it with others online and provide an easy way to back up or
archive data without consuming disk space on a PC's hard drive.
PC World survey also features a variety of other free
services available on the Web, including e-mail services; personal
information managers (PIMs), and scheduling services; Web hosting
or Web site construction sites; business services, such as free
tools to build Internet "storefronts"; and even free telephone
services via the Internet.
software (i.e., Web browsers, word processors, graphics programs,
and games) is prevalent on the web as well. And Internet users can
even find comprehensive inventories of many free services that are
available on the Internet (see Table 6).
freelance authors and Internet watchers Jeff Bertolucci and Matt
Lake note, the dynamic nature of competition and entrepreneurialism
in this vibrant virtual marketplace means the future will remain
bright for access:
[T]today's free Web services may be too expensive
tomorrow. Fortunately, competition in the free online service
market is fierce, so if you favorite site suddenly starts asking
for money, feel free to go elsewhere.
Hybrid Systems and the Post-PC Era
importance to this debate on the digital divide is the rise of
hybrid computing systems that offer unique ways to access the
Internet. The market for "Internet appliances" or "information
appliances"--virtually unheard of even a few years ago--is booming.
Internet appliances essentially are PCs that have no hard drive,
memory storage, or operating system. For as little as $99 (though
usually $200 to $400), consumers receive a keyboard and monitor
with prepackaged software that permits instantaneous Internet and
e-mail access. Sony Corporation's "Web TV" was a precursor of this
technology, although that system uses standard television sets as
known as "dumb terminals," these Internet or information appliances
"are aimed squarely at getting consumers cheaply, quickly, and
almost effortlessly onto the Internet," notes New York Times
reporter Michel Marriott. Companies offering such
systems include Netpliance ("i-opener"), Acer America
("I-station"), Qubit Technology ("Qubit Web Tablet"), and Compaq
("MSN Web Companion"). As prices continue to fall and these systems
gain in popularity, they could become home fixtures as common as a
toaster or a microwave oven. Lamar Potts, vice president of
marketing for Be Inc., based in Menlo Park, California, believes
that "you are going to have one literally in every room of your
Although some critics may bemoan the
absence of a hard drive with storage capacity as part of these
systems, consumers need not be concerned. The free storage sites
available online make a hard drive unnecessary for storing files or
documents. Savvy consumers could attach an inexpensive external
hard drive to these dumb terminals, download operating system
software such as "LINUX" or "BeOS 5," and create an inexpensive,
homemade PC system for under $200.
Likewise, handheld devices or Personal
Digital Assistants (PDAs) offer consumers a portable computer that
can perform many of the same tasks as a desktop PC. As they become
increasingly sophisticated and fall in price, such handheld devices
likely will become as ubiquitous as cellular phones.
Finally, new video game consoles by Sega,
Sony, Nintendo, and even Microsoft are likely to include modems and
other integrated features (such as a CD/DVD player) to allow
consumers to benefit from the gaming platforms they purchase for
their children. For example, the new Sega Enterprises Ltd.
"Dreamcast" system includes a 56kbs modem and Web-browsing
software. Although it originally sold for $199, Sega recently
announced that it will give the Dreamcast systems away for free to
any consumer who agrees to sign up for two years of Sega Web
Internet access service for $21.95 a month. Consumers already
owning a Sega system can sign up for monthly Internet access and
receive a $200 rebate check as well as a free keyboard.
These hybrid and emerging computing
systems offer consumers a continuously expanding array of options
at affordable prices. While desktop PCs remain quite popular, the
newer systems or those on the drawing board could become the
technology of choice in the near future. In fact, market research
firm International Data Corp. estimates that shipments of Internet
appliances will surpass shipments of personal computers by as early
other words, many industry watchers argue that a "post-PC" era is
set to dawn that will be characterized by numerous computing and
communications alternatives. In such a rapidly changing
environment, policymakers should be wary of subsiding any one
technology in particular, as this would be tantamount to picking
winners and losers in a dynamic marketplace. America does not need
an industrial policy for the computer sector.
IS GOVERNMENT INTERVENTION NEEDED?
The "Pipe into the Home" Concern
all Americans can gain access to a computer and to the Internet for
free or for a very small fee, there is only one potential problem
left to worry the "digital divide" proponents: the lack of a
conduit or "pipe into the home" through which the "have nots" could
access the Internet, the World Wide Web, and interactive
is a legitimate concern, because the size of the "pipe" (the
conduit's bandwidth capacity) will determine how fast a consumer
can access the Internet or whether access will be available at all.
The good news is that almost every American home is "wired."
Telephone, cable, and electrical utility companies all wire
American homes for service. (See Chart 2.) The bad news is that
these companies only recently have taken steps to make the wires
Internet-capable. This has been an expensive and difficult process,
and it will take some time to complete. Nevertheless, many of these
companies are rapidly upgrading their systems and developing and
deploying new networks to satisfy demand for high-speed Internet
access. Cable companies are deploying cable modems and upgrading
their systems to make them Internet-capable. Telephone companies are
meeting this challenge by deploying digital subscriber line (DSL)
services in many communities for high-speed access. SBC
Communications Inc., for example, recently announced plans to spend
$6 billion over the next three years to deploy more advanced
broadband network technologies to its customers. Similarly, fiber optic
communications network providers "are in the midst of a
fiber-building frenzy," according to Toni Mack of Forbes
utility companies are also getting into the Internet business by
modifying their electrical and natural gas networks to offer
customers Internet access. Montana Power Company
announced in late March, for example, that it plans to sell its
electricity and natural gas businesses and focus instead on
providing communications services to its rural customers. It
already has invested more than $250 million in its "Touch America"
telecommunications subsidiary and deployed 12,000 miles of fiber
optic cable throughout the state. It plans to double that total to
over 26,000 miles of fiber optic cable by the end of 2001.
"Private and public power companies have
been laying fiber-optic lines inside their own networks for years,
with the aim of communication between substations, and creating a
more efficient way to read customers' power meters," notes John
Borland of CNET News.com. "Slowly, those companies are
beginning to realize that the fiber optic also puts them in the
catbird's seat for digital communications. Some of the large
private companies, such as Enron, Reliant Energy, and Southern
California Edison are already offering data services over their
communications lines, and others are beginning to follow suit,"
Borland reports. Since almost every
residence in America has an electrical or natural gas wire running
into it, consumers will soon gain access to yet another broadband
provider of Internet access.
exciting than these developments, however, are the efforts of
wireless/satellite companies to develop and deploy set-top
technologies that will provide consumers Internet access through
satellite dishes. America Online recently invested $1.5 billion in
Hughes Electronics Corporation's "DirecPC" venture, which is a
satellite-based broadband Internet delivery system. And more
ambitious efforts are being undertaken by firms such as Teledesic
LLC and SkyBridge LLC, which would provide high speed,
satellite-based, broadband access to consumers anywhere in the
world at speeds comparable to a fiber optic communications system.
Such efforts to deploy wireless broadband services to consumers
have the obvious advantage of lessening geographic concerns or
making cost concerns less relevant. This would make it easier for
firms to deliver Internet and communications services to rural
America and other pockets of the country that are more difficult to
Finally, it is important that policymakers
understand that many burdensome regulations and taxes exist at the
federal, state, and local level that discourage or prohibit the
deployment of broadband technologies to the home. Federal
laws prohibit local telephone companies from deploying data
networks across random geographic lines. Municipal government
mandates on cable companies that attempt to regulate access to
their networks could also slow broadband deployment. Local
zoning ordinances can interfere with the timely rollout of new
broadband services. And the telecommunications sector in general
faces a stunning myriad of industry-specific taxes at all levels
that impede the development of new services. Removing these impediments
would greatly facilitate the deployment of high speed broadband
services to homes.
PCs as Workplace Benefit
private employers are experimenting with PC-giveaway programs,
offering their employees an inexpensive PC and Internet access as a
benefit. Several major U.S. corporations recently announced plans
to give their employees a computer, a monitor, speakers, a printer,
and Internet access for as little as $5 to $12 per month.
Among the major companies now offering
this new type of employee work benefit are: Ford Motor Company
(350,000 employees); Delta Air Lines (72,000 employees); American
Airlines (112,000 employees); and Intel Corporation (70,000
employees). These efforts are likely to
be imitated by other corporations.
How the Market Delivers
decisionmaking purposes, it is worth examining whether government
subsidies and central planning can ensure, better than the
marketplace, that all Americans have access to personal computers
and the Internet. In fact, as data from the U.S. Census Bureau, the
Electronic Industries Alliance, and other sources on household
penetration rates for major technologies indicate, Americans are
gaining access to PCs and the Internet at a rate much faster than
for previous technologies.
example, consider how long it took other technologies to reach 50
percent penetration of U.S. households. As Chart 3 and Chart 4
illustrate, it took television 18 years to break the 50 percent
threshold; radios, 28 years; VCRs, 12 years; electrical service, 52
years; and telephones, 70 years. By comparison, Forrester Research,
Inc., estimates that the Internet, which has existed as a
commercial service for less than 10 years, will be available to
over half of all American households by 2001. PC Data Inc.
currently estimates that 47.6 percent of all households already
have Internet access. And a very optimistic survey by market
research firm Cahners In-Stat Group estimates that over 60 percent
of all American homes would have Internet access by the end of this
Moreover, although estimates vary, Forrester, PC Data Inc., and
other sources estimate that roughly 55 to 60 percent of American
homes already possess a personal computer.
Helen Chaney of the Pacific Research Institute notes,
Internet access has spread to 50 million
people in only four years. That's about nine times faster than
radio, four times faster than the personal computer and three times
faster than television. At this rate, it won't be long until all of
those who desire Internet access will have it. If the government
wants to spread Internet access, they should leave the Internet
unregulated and ease up on the taxes individuals pay.
The Slippery Subsidy Slope
Subsidizing PCs and the Internet today
could become a slippery slope leading to increased government
regulation tomorrow. All too often, industries that government
sought to promote, such as telephony, electricity, and railroads,
became heavily regulated over time. This led to decreased
competition, inferior goods and services, less innovation and
entrepreneurialism, and a general lack of price competition.
PC and Internet penetration occurring more rapidly than previous
technologies had, there appears to be little need for government
intervention. As Chaney aptly summarizes, "This all goes to show
the private sector has it covered. What is required from the
government now is not money, but patience."
Choosing Not to be Connected Is a Personal
individuals or families choose not to have a personal computer and
Internet access in the home. Some Americans, in fact, shun the
presence of computing technologies in the home altogether, the same
way others decide not to have cable television or other
technologies in their homes. Moreover, many citizens have access to
a computer in the workplace, and feel little need to have one in
millions of Americans choose to utilize computing technologies in
the workplace and not have a home computer, should they be counted
among those who lack access? If a significant segment of the
population continues to rely on workplace access instead of
personal ownership of computing technologies, then household
penetration rates for PCs and Internet access may never break 80
percent. Clearly, this does not mean those households without PCs
or Internet access are
falling into a "digital divide."
How the Market Targets Low-Income Homes
Politicians should not allow this debate
to turn into a race or civil rights dispute since, by most
accounts, the fastest growth in computer use may be occurring among
minorities and low-income households. As Scott Mills, Chief
Operating Officer of Black Entertainment Television Inc.'s "" noted recently in testimony before the House Committee
on Small Business Subcommittee on Empowerment,
African Americans currently underutilize
the Internet relative to other ethnic segments. However, African
Americans are projected to be the fastest growing online ethnic
population in 2000. Forrester Research projects that 40% of the 34
million person African American community will be online by the end
Institute Executive Vice President David Boaz agrees with this
assessment, noting that, "From 1994 to 1998, computer ownership by
whites increased 72%, while ownership by blacks increased 125%."
Moreover, low-income households are
increasingly seen as the most popular segment of the market to
target by computer firms. "PC ownership has reached a
near-saturation point among middle- and upper-income families,"
notes John Simons, Markle Fellow at the New America Foundation in
Washington, D.C. "If computer makers wish to
maintain the extraordinary revenue growth they've seen over the
last half-decade, they will soon be forced to seek out new
first-time buyers," he argues. Moreover,
Some PC companies no doubt will push hard
to find willing buyers among the 13.5 million U.S. households with
annual incomes less than $25,000, 90 percent of which do not own a
expectation helps explain the recent rise of free and low-priced
there a digital divide crisis in America? No, there is not. If
Americans really want a personal computer and access to the
Internet, they can obtain them at very little cost. Moreover, this
trend to lower-cost PCs and more access is likely only to increase.
Expensive federal entitlement programs will not facilitate this
process; in fact, they might actually make things worse by putting
pressure on computer prices to hold steady or increase.
the extent government involvement is needed, it is to remove any
tax and regulatory roadblocks that discourage private companies in
the free market from offering new products and services that
consumers demand. There is no constitutional or economic
justification for federal intervention.
the data presented above illustrate, policymakers at all levels
need not fear that some Americans may be left behind in this
profoundly dynamic Information Age. Proposals to offer consumers
$500 vouchers for computer systems are particularly unwise when
consumers can obtain them for hundreds of dollars less. It would be
tantamount to giving every American a $20,000 subsidy for a new
automobile when models are available for less than half that price.
Furthermore, if indications are right that the world is entering a
"post PC" era in which various types of technologies will be used
to communicate and access the Internet, then current efforts to
subsidize the diffusion of personal computers will limit many
people to technology that quickly becomes outdated.
Clearly, the personal computer industry is
not in crisis. As the recent Computer Shopper magazine article on
the rise of the free-PC market fittingly concludes:
[I]t's becoming increasingly clear that
the free-PC movement has come a long way in a relatively short
time, and it obviously benefits consumers who wouldn't otherwise be
able to afford a Net-connected computer. And that's a very good
Adam D. Thierer is a
former Alex C. Walker Fellow in Economic Policy Studies in the
Thomas A. Roe Institute for Economic Policy Studies at The Heritage