FALLING THROUGH THE NET:

TOWARD DIGITAL INCLUSION

A Report on Americans' Access to Technology Tools

October 2000

U.S. Department of Commerce

Economics and Statistics Administration

National Telecommunications and Information Administration

 THE SECRETARY OF COMMERCE

 Washington, DC 20230

The digital economy is moving our Nation toward greater prosperity. Our goal at the Commerce Department is to ensure that all Americans - regardless of age, income, race, ethnicity, disability, gender or geography - gain access to the technological tools and skills needed in the new economy.

Falling Through the Net: Toward Digital Inclusion is a key part of the Department's ongoing efforts to promote full participation in the digital economy. It is important for our Nation to measure and analyze how the digital economy is affecting its citizens.

I am pleased that the data in this report show that, overall, our Nation is moving toward full digital inclusion. The number of Americans who are utilizing electronic tools in every aspect of their lives is rapidly increasing. However, a digital divide still remains. The report shows that not everyone is moving at the same speed, and identifies those groups that are progressing more slowly. The report also is rich with insights into how Americans are gaining access to key technologies, and how they are using such tools. With this information, we can better target and enact policies and programs to close the disparities in access to computers and the Internet that still are being experienced by some in our Nation.

I applaud the many public and private sector efforts that are helping Americans achieve greater access to the tools of the digital economy. We are rapidly becoming a digital Nation. We know that to not have access to such tools means to miss out on tremendous economic and educational opportunities. This report shows us that much work is left to be done.

Norman Y. Mineta

FALLING THROUGH THE NET:

TOWARD DIGITAL INCLUSION

INTRODUCTION

Robert J. Shapiro

Under Secretary for Economic Affairs

Administrator, Economics and Statistics Administration

Gregory L. Rohde

Assistant Secretary for Communications and Information

Administrator, National Telecommunications and Information Administration

This is the fourth report in the Commerce Department series of studies, Falling Through the Net. The previous three were focused on the theme of the "Digital Divide," the concept that the society should not be separated into information haves and information have-nots.

With this report, we move into a new phase of our information-gathering and policy-making by recognizing the phenomenal growth that has taken place in the availability of computing and information technology tools, tempered by the realization that there is still much more to be done to make certain that everyone is included in the digital economy. Thus, the theme for this year, Toward Digital Inclusion, recognizes each element of the equation---the progress made and the progress yet to be made.

Measuring the growth and use of the Internet is, like the Internet itself, a complex endeavor. This report reflects our attempt to capture three of the key benchmarks. Part I looks at Internet and computer access of households. We do this because the household is the traditional standard by which access is defined, in the United States and around the world. The examination of household access includes such factors as geography, income, race, and household type.

In looking at the results and trying to determine the progress from year to year, it is important to understand that there is more than one way to interpret the results. When looking at computer and Internet access, it is clear that certain groups have far higher levels of Internet access and computer ownership. These groups have generally exhibited greater percentage point changes in their penetration rates from one survey to the next. On the other hand, they exhibit slower expansion rates from one survey to the next. At the same time, groups with lower penetration rates are exhibiting smaller percentage point changes but higher expansion rates because they are starting from a much lower base and have more opportunity for rapid and greater expansion.

Part I also includes a new facet to the survey. For the first time, we survey household access to high-speed Internet services, primarily through cable TV and Digital Subscriber Line services. There are large differences in high-speed access based on income and other variables, and these initial data will enable us to track the increases and diffusion of high-speed access as broadband infrastructure is widely adopted.

Part II provides a different way of looking at the penetration of Internet access and computers. Instead of looking at households, this section of the report examines computer and online access by individuals. Many households, for example, include people who do not use the Internet, and the rate or degree at which this occurs differs among groups. By focusing on individuals, we are also able to capture important differences in Internet use based on people's age, gender, and labor force status. We can also look at how people use the Internet, for example, for e-mail or to look for a job, as well as where they use it, whether at home or at a library, for example.

Part III, for the first time, examines the use of computers and the Internet among people with disabilities that adversely affect their ability to walk, to see, to hear, to use their hands and fingers, or to learn. In general, Internet access is half as common among people with disabilities as among other people, and computer access is even more skewed. To some degree this may reflect the fact that on average, disabled people are older and less likely to be employed, and also have lower incomes than people without disabilities. All of these variables are associated with lower computer and Internet use.

By preparing and issuing this report, we hope to establish an objective baseline so the American people can understand the critical issue of access to the information technologies that are transforming the economy and our lives. In this way, this report can provide a basis for the continuing public debate about how best to ensure that every American can participate in the digital economy.

EXECUTIVE SUMMARY

The Internet is becoming an increasingly vital tool in our information society. More Americans are going online to conduct such day-to-day activities as education, business transactions, personal correspondence, research and information-gathering, and job searches. Each year, being digitally connected becomes ever more critical to economic and educational advancement and community participation. Now that a large number of Americans regularly use the Internet to conduct daily activities, people who lack access to these tools are at a growing disadvantage. Therefore, raising the level of digital inclusion by increasing the number of Americans using the technology tools of the digital age is a vitally important national goal.

This report, Falling Through the Net: Toward Digital Inclusion, is the fourth in the Falling Through the Net series. In this report, we measure the extent of digital inclusion by looking at households and individuals that have a computer and an Internet connection. We measure the digital divide, as we have before, by looking at the differences in the shares of each group that is digitally connected. For the first time, we also provide data on high-speed access to the Internet, as well as access to the Internet and computers by people with disabilities.

The data show that the overall level of U.S. digital inclusion is rapidly increasing:

• The share of households with Internet access soared by 58% since the last survey, rising from 26.2% in December 1998 to 41.5% in August 2000.


• More than half of all households (51.0%) have computers, up from 42.1% in December 1998.

• There were 116.5 million Americans online at some location in August 2000, 31.9 million more than there were only 20 months earlier.



• The share of individuals using the Internet rose by a third, from 32.7% in December 1998 to 44.4% in August 2000. If growth continues at that rate, more than half of all Americans will be using the Internet by the middle of 2001.

The rapid uptake of new technologies is occurring among most groups of Americans, regardless of income, education, race or ethnicity, location, age, or gender, suggesting that digital inclusion is a realizable goal. Groups that have traditionally been digital "have nots" are now making dramatic gains:

• The gap between households in rural areas and households nationwide that access the Internet has narrowed from 4.0 percentage points in 1998 to 2.6 percentage points in 2000. Rural households moved closer to the nationwide Internet penetration rate of 41.5%. In rural areas this year, 38.9% of the households had Internet access, a 75% increase from 22.2% in December 1998.

• Americans at every income level are connecting at far higher rates from their homes, particularly at the middle income levels. Internet access among households earning $35,000 to $49,000 rose from 29.0% in December 1998 to 46.1% in August 2000. Today, more than two-thirds of all households earning more than $50,000 have Internet connections (60.9% for households earning $50,000 to $74,999 and 77.7% for households earning above $75,000).



• Access to the Internet is also expanding across every education level, particularly for those with some high school or college education. Households headed by someone with "some college experience" showed the greatest expansion in Internet penetration of all education levels, rising from 30.2% in December 1998 to 49.0% in August 2000.


• Blacks and Hispanics still lag behind other groups but have shown impressive gains in Internet access. Black households are now more than twice as likely to have home access than they were 20 months ago, rising from 11.2% to 23.5%. Hispanic households have also experienced a tremendous growth rate during this period, rising from 12.6% to 23.6%.

• The disparity in Internet usage between men and women has largely disappeared. In December 1998, 34.2% of men and 31.4% of women were using the Internet. By August 2000, 44.6% of men and 44.2% of women were Internet users.

• Individuals 50 years of age and older -- while still less likely than younger Americans to use the Internet -- experienced the highest rates of growth in Internet usage of all age groups: 53% from December 1998 to August 2000, compared to a 35% growth rate for individual Internet usage nationwide.

Nonetheless, a digital divide remains or has expanded slightly in some cases, even while Internet access and computer ownership are rising rapidly for almost all groups. For example, our most recent data show that divides still exist between those with different levels of income and education, different racial and ethnic groups, old and young, single and dual-parent families, and those with and without disabilities.

• People with a disability are only half as likely to have access to the Internet as those without a disability: 21.6% compared to 42.1%. And while just under 25% of people without a disability have never used a personal computer, close to 60% of people with a disability fall into that category.



• Among people with a disability, those who have impaired vision and problems with manual dexterity have even lower rates of Internet access and are less likely to use a computer regularly than people with hearing difficulties. This difference holds in the aggregate, as well as across age groups.

• Large gaps also remain regarding Internet penetration rates among households of different races and ethnic origins. Asian Americans and Pacific Islanders have maintained the highest level of home Internet access at 56.8%. Blacks and Hispanics, at the other end of the spectrum, continue to experience the lowest household Internet penetration rates at 23.5% and 23.6%, respectively.


• Large gaps for Blacks and Hispanics remain when measured against the national average Internet penetration rate.
 

-- The divide between Internet access rates for Black households and the national average rate was 18 percentage points in August 2000 (a 23.5% penetration rate for Black households, compared to 41.5% for households nationally). That gap is 3 percentage points wider than the 15 percentage point gap that existed in December 1998.

-- The Internet divide between Hispanic households and the national average rate was 18 percentage points in August 2000 (a 23.6% penetration rate for Hispanic households, compared to 41.5% for households nationally). That gap is 4 percentage points wider than the 14 percentage point gap that existed in December 1998.

-- With respect to individuals, while about a third of the U.S. population uses the Internet at home, only 16.1% of Hispanics and 18.9% of Blacks use the Internet at home.

-- Differences in income and education do not fully account for this facet of the digital divide. Estimates of what Internet access rates for Black and Hispanic households would have been if they had incomes and education levels as high as the nation as a whole show that these two factors account for about one-half of the differences.

• With regard to computer ownership, the divide appears to have stabilized, although it remains large.

-- The August 2000 divide between Black households and the national average rate with regard to computer ownership was 18 percentage points (a 32.6% penetration rate for Black households, compared to 51.0% for households nationally). That gap is statistically no different from the gap that existed in December 1998.

-- Similarly, the 17 percentage point difference between the share of Hispanic households with a computer (33.7%) and the national average (51.%) did not register a statistically significant change from the December 1998 computer divide.

• Individuals 50 years of age and older are among the least likely to be Internet users. The Internet use rate for this group was only 29.6% in 2000. However, individuals in this age group were almost three times as likely to be Internet users if they were in the labor force than if they were not.

• Two-parent households are nearly twice as likely to have Internet access as single-parent households (60.6% for dual-parent, compared to 35.7% for male-headed households and 30.0% for female-headed households). In central cities, only 22.8% of female-headed households have Internet access.


• Even with broadband services, a relatively new technology used by only 10.7% of online households, there are disparities. Rural areas, for example, are now lagging behind central cities and urban areas in broadband penetration at 7.3%, compared to 12.2% and 11.8%, respectively.

Americans are using the Internet in the following ways:

• E-mail remains the Internet's most widely used application -79.9% of Internet users reported using e-mail.
 
• Online shopping and bill paying are seeing the fastest growth.
 
• Low income users were the most likely to report using the Internet to look for jobs.
 
• The August 2000 data show that schools, libraries, and other public access points continue to serve those groups that do not have access at home. For example, certain groups, such as the unemployed, Blacks, and Asian Americans and Pacific Islanders, are more likely to use public libraries to access the Internet.

Internet access is no longer a luxury item, but a resource used by many. Overall, the findings in this report show that there has been tremendous progress in just 20 months, but much work remains to be done. Computer ownership and Internet access rates are rapidly rising nationwide and for almost all groups. Nonetheless, there are still sectors of Americans that are not digitally connected.

PART I

HOUSEHOLD ACCESS TO COMPUTERS AND THE INTERNET

Americans bought home computers and hooked them up to the Internet at a remarkable rate between December 1998 and August 2000. In just 20 months, the share of households with Internet access soared by 58%, from 26.2% to 41.5%, while the share of households with computers rose from 42.1% to 51.0%.⁽¹⁾ More than 80% of households with computers also have Internet access today, up from little more than 60% in 1998.

Virtually every group has participated in the sharp upward trend of Americans connecting their homes to the Internet. Large gains occurred at every income category, at all education levels, among all racial groups, in both rural and urban America, and in every family type. As documented since 1997, certain groups are much further ahead than others in establishing Internet connections from home. This year, however, we found that households in the middle income and education ranges are gaining ground in connecting to the Internet at a rate as fast or faster than those at the top ranges.

The rapid growth in computer and Internet use among those in the middle income and education ranges and among relatively disadvantaged populations suggests that, in some cases, the digital divide has begun to narrow or will do so soon, and that we are entering a period of fuller digital inclusion. In general, groups with very low adoption levels in 1998 experienced some of the highest expansion or growth rates over the last two years, even though they may not have experienced a high percentage-point change.⁽²⁾ (See Tables I-1 and I-2 on pages 30 and 31.)

This section of the report examines the prevalence of households with home computers and Internet access by various demographic and geographic breakdowns, and also discusses reasons why some households with computers chose not to go online. We also look at the penetration of higher speed Internet access. Although still modest---11% of Internet users and 4% of all households---these broadband connectivity rates establish a benchmark for future comparisons.

OVERALL HOUSEHOLD FINDINGS: THE NATION MOVES TOWARD DIGITAL INCLUSION

Between December 1998 and August 2000, U.S. households' access to computers and the Internet grew dramatically. According to the latest survey, 43.6 million households (or 41.5% of all households) had Internet access.⁽³⁾ The percentage of homes with household Internet access registered an impressive 58% gain from the 26.2% penetration rate in December 1998.

Computer ownership has also continued to soar. In August 2000 53.7 million households had computers. The percentage of homes with computers rose by 21%, from 42.1% to 51.0%, from December 1998 to August 2000. Taking a slightly longer view, since 1997, computer penetration has risen by almost 40%, while Internet access has soared by 123%.

The rapid uptake of the Internet is perhaps best revealed by examining the growing percentage of households with computers or other devices that connect to the Internet. In 1997, just over half of all households with computers had Internet access. By 2000, that figure had surged to four out of five households.

DIGITAL INCLUSION PROCEEDS UNEVENLY

The tremendous growth in household computer and Internet use has occurred across all demographic groups, including income and education levels, races, locations, and household types. Nevertheless, some Americans are still connecting at far lower rates than others, creating a digital divide (i.e., a difference in rates of access to computers and the Internet) among different demographic groups.

Certain groups (such as Whites, Asian Americans and Pacific Islanders, and those with higher income and education levels) have higher than average levels of computer ownership and Internet access. These groups have generally exhibited greater percentage point changes (that is, the change in penetration rate from one survey to the next). On the other hand, they exhibit slower expansion or growth rates (i.e., growth in the percentage rate). At the same time, groups with lower penetration rates (such as Blacks, Hispanics, and those with lower income and education levels) are exhibiting smaller percentage point changes but higher expansion rates because they are starting from a much lower base and have more opportunity for rapid, and greater, expansion. For example, a group that had a penetration rate of 10% in December 1998 and 20% in August 2000 would exhibit a 100% expansion rate but only a 10 percentage point change.

A case in point centers on households with both high income and high education levels. These households made substantial percentage point gains in Internet access over 20 months. They had already achieved relatively high levels of penetration by December 1998. Their expansion rates since that date, however, have been matched or surpassed by those with mid-range incomes and levels of education.

The pattern exhibited thus far by household access to both computers and the Internet accords with the "S-curve" pattern typically observed in the adoption of new technologies. Historically, when a new technology is first introduced, the number of users expands rapidly but from a low base. Over time, as a group reaches the middle range of the S-curve, the growth rate tends to slow while the point change continues to increase. Once the penetration nears its saturation point (at the higher end of the S-curve), both the percentage point change and the expansion rate begin to decrease.

The adoption rates along these curves depend on a number of factors, including the awareness of the new technology, the affordability of that technology, adaptations to the technology to widen its potential market, and the attraction for people to use the technology as its usage becomes widespread. The purchase of computers for the home has been spurred not only by falling prices and more user-friendly software, but also by public policy decisions not to regulate or otherwise impede the rapid expansion of the Internet. For Internet access itself, the continuation of public policies to promote competition (that lowers prices and improves quality) and to make new technologies more accessible will substantially influence the uptake rates of the current groups of information "have-nots," and will help move these groups to greater digital inclusion.

Below we examine variations in household Internet and computer access, looking at differences in geography, income, race/ethnicity, education, and household type.

GEOGRAPHY

One of the most dramatic shifts that has occurred since December 1998 has been the increase in Internet access by rural households. Rural areas narrowed the divide when compared to the national average. In contrast, central cities had significant increases in access, but fell behind other parts of the country in terms of the gains in access. Urban areas, even though they include central cities, continue to have a greater percentage of households with Internet penetration than rural areas.⁽⁴⁾ Data relating to Internet access by geography can be found in the Appendix, Figures A8-A10, A12-A14.

Rural Households Narrow the Gap

Rural households, which historically trailed those in central cities and urban areas, are showing significant gains in Internet access. The gap between households in rural areas and households nationwide that access the Internet has recently narrowed. There was a 4.0 percentage point difference in 1998, narrowing to a 2.6 point difference in 2000.

In rural areas this year, 38.9% of households had Internet access, an increase of 75% from 1998's access rate of 22.2%. In October 1997, just 14.8% of rural households had online access.

Rural Black households, which have historically had the lowest rates of Internet access, made significant gains. In December 1998, 7.1% of those households had Internet access. By 2000, the figure jumped to 19.9%.

The growth in rural Internet household access has come at all income levels, with the lowest levels showing some of the highest growth rates. As a result, the Internet access rates for rural households now approximate those of households across the country.

In the lowest income category, households with income below $15,000, Internet access for rural households rose from 4.6% to 11.3%. At most of the other income levels, rural households now come close to the nationwide figures, having doubled their access rates through the middle income levels. Growth rates have been slower at the highest income levels, but the access rates are only slightly below the national average.

Slower Growth in Central Cities

In contrast to the strong growth in rural areas, households in central cities have experienced much lower rates of increase for their Internet penetration. In August 2000, 37.7% of central city households had Internet access, contrasted with the national figure of 41.5%-a gap of 3.8 percentage points. In December 1998, central city households had a 24.5% access rate, 1.7 percentage points lower than the national rate. In terms of the national figures, the gap appears to be growing, rather than narrowing, and central cities have slipped below the rural areas in terms of household access.

Although households in central cities experienced double-digit growth in household Internet access, their access rate was below that of the national average. The increase for central city households from December 1998 to August 2000 was 13.2 percentage points (an expansion of 54%). This compares to an increase over the 14 months between the 1997 and 1998 surveys of 7.2 points (a growth rate of 42%).

Every income category for central city households showed double-digit percentage growth between 1998 and 2000. At the lowest income level, below $15,000, household Internet access nearly doubled, from 7.7% in 1998 to 13.5% in 2000 (an increase of 75%).

Black households in central cities registered a 20.1% access rate, about double the 1998 rate of 10.2%, but slightly below the national average for Blacks of 23.5%. Hispanic households in central cities had a 21.5% access rate, a little more than double the 1998 figure of 10.2%, but slightly below the national average for Hispanic households of 23.6%.⁽⁵⁾ White central city households had a 47.1% Internet access rate, up from 32.3% in December 1998.

Urban Areas Continue Above-Average Internet Access

Urban areas continued to have the highest household Internet penetration rates. The rate of growth in household Internet access in urban areas between 1998-2000 was about the same as it was for central cities, about 57%. However, the level of Internet access in urban areas started from a high level, and continued to exceed the national average.

In urban areas, 42.3% of households had Internet access, contrasted with 41.5% of households nationally in 2000. Urban households have seen a steady increase over the last three years. In 1997, the Internet penetration rate for urban households was 19.9%. It grew to 27.5% in 1998. The lowest income levels saw a 72% increase between 1998 and 2000, which translated to a 5.5 percentage point increase to the current level of 13.2% access for households with incomes under $15,000. The $75,000+ category had a household access rate of 78.0%, the highest single category rate for the geographic regional breakdown.

Each racial and ethnic group had higher household Internet penetration rates in urban areas than in rural areas. Urban Black households registered a 24.0% access rate, up from 11.7% in December 1998, and contrasted with the rural figure of 19.9% for Black households. Hispanic households had a 23.9% rate, up from 12.9% in December 1998, and above the 19.9% rural rate for Hispanic households. The White household rate in urban areas was 48.3%, up from 32.4% in December 1998, and above the national average of 46.1%.

Snapshot from Geographical Regions

The West continues to be the most on-line region of the country, with household Internet access of 46.6%, followed by the Northeast (43.0%), Midwest (40.9%), and South (37.9%). Rural areas in the Northeast registered the highest access rate (49.9%), followed by urban areas in the West (47.2%). Northeast central city regions had the lowest household access rate (33.1%), followed by rural regions in the South (33.8%).

Computer Ownership by Geography

Nationally, just over half (51%) of households own computers, up from 42.1% in December 1998. Urban areas had the highest rate of ownership (51.5%), increasing 8.6 points in the last 20 months. Rural areas, tracking the growth in Internet access, increased 9.7 percentage points, to reach a household ownership level of 49.6%. Central cities had a 46.3% ownership rate, up 7.8 points since December 1998. All data relating to computer ownership by geography can be found in the Appendix, Figures A2-A4, A6-A7.

Households in all regions at all income levels also showed improvement in computer ownership. In both central cities and in urban areas, 20% of households with less than $15,000 in income now own computers, contrasted with 17% of rural households in the same income bracket. Nationally, 19.2% of households with less than $15,000 owned a computer in August 2000, up from 14.5% in December 1998.

INCOME

Although computers and Internet access are coming down in price, they are still sufficiently expensive that household income remains an important factor in home Internet access. Nevertheless, households across all income levels and throughout the country have made significant gains in Internet access since December 1998. Some of the biggest gains have come at every income level in rural areas. In addition, gains have been made at all income levels by different racial and ethnic groups. Data relating to Internet access by income can be found in the Appendix, Figures A9 and A11.

Internet Penetration Rises Across Income Levels

Household Internet access continues to correlate closely with income. Across the United States, however, households in the lower income bands registered increases in Internet access much faster than the national 58% gain. Households with less than $15,000 in income had a 12.7% Internet penetration rate, 79% higher than in December 1998⁽⁶⁾ .Between 1997 and 1998, the income band improved 82%, from 3.9% penetration to 7.1%. At the $15,000-$24,999 income levels, 21.3% of households had Internet access. The rate of increase between 1998 and 2000 was 93%, as the penetration rate increased steadily from 8.1% in 1997, to 11.0% in 1998, to 21.3% in 2000. In August 2000, the penetration rate for households with incomes between $25,000 and $34,999 stood at 34.0%, an increase of 78% over the 19.1% penetration rate in 1998.

All three income ranges beyond $35,000 had the same 17 point gain from 1998 to 2000. Households with income between $35,000 and $49,999 achieved a 46.1% Internet penetration rate in 2000, up from 29.0% in 1998. Households with incomes between $50,000 and $74,999 went from 43.9% to 60.9%, while those at $75,000 and above climbed from 60.3% to 77.7%. With the same point gain but starting from much lower initial levels, the $35,000-$49,999 and the $50,000-$74,999 income groups had larger expansion rates than the highest income group.

Geographic Areas Show Different Rates of Increase

Different areas of the country showed different rates of growth in household Internet penetration at incomes below $75,000. At the highest income level ($75,000 and higher) household penetration was relatively equal in all geographic areas at 77%.

For households earning less than $15,000 annually, rural households had the lowest penetration rate at 11.3%. However, that rate is more than double what it was for the same group of households in 1998 (at 4.5%). In other locations, however, the household penetration rate for the lowest income group is higher, even if the rate of growth is lower. In urban areas, for example, 13.2% of lowest-income households had Internet access, an increase of 5.5 percentage points (72% higher than 1998 levels). Central city households with incomes below $15,000 achieved a 13.5% penetration rate in 2000, a 75% increase from 1998.

Rural areas at all income levels showed the highest percentage increases in penetration rates. In addition to the 146.5% for the lowest income group, households with incomes between $15,000 and $24,999 achieved increases of almost 120%. However, in August 2000, 17.0% of rural households at the lowest income level owned a computer, contrasted with 19.9% of households with less than $15,000 income in urban areas and in central cities. Increases in Internet access across all income levels in other areas were lower, but all showed improvement. In urban areas, for example, Internet access among households with incomes between $15,000 and $24,999 grew 87% in 2000 over their 1998 access rates. Central city households, however, had lower increases than rural areas. The household income brackets with the highest percentage increases were the group with less than $15,000 income, which achieved a 75% increase, to a 13.5% penetration level, and the group between $15,000 and $24,999, which had a 61% increase, achieving a 20.7% access level for 2000.

Low-Income Households Show Computer Ownership Gains

Almost one-fifth (19.2%) of households in the lowest income bracket (under $15,000 per year) now own computers, an increase of 4.7 percentage points from the 14.5% figure in December 1998. Overall, households at the lowest income levels increased their ownership of computers by approximately one-third in August 2000 over the December 1998 levels.

At other income levels, 30.1% of households in the $15,000-$24,999 bracket had computers in 2000, a 27% increase over 1998. The next fastest growing income bracket for computer penetration was the $25,000-$34,999 bracket. In that group, 44.6% of households owned a computer, an increase of 25% from the 35.8% penetration rate in 1998. For all three income categories above $35,000 rural households were as likely as their urban peers to have a computer at home. At income levels of more than $75,000, 86.3% of households had a computer, up from 79.9% in 1998. The ownership rate in central cities (83.7%) trailed the national average at that income.

Data relating to computer ownership by income can be found in the Appendix, Figures A3 and A5.

EDUCATION

Home computer and Internet access rates vary by the education level of the reference person or householder (a person residing in the housing unit who owns it or is responsible for its rent). Better educated adults are more likely to use and become familiar with computers and the Internet at work or through their school experiences. In December 1998, 53.0% of households headed by a person with education beyond college had Internet access. That surpassed the access rate for households headed by a person with a bachelor's degree (46.8%), those with some college experience (30.2%), those with a high school diploma (16.3%), and those with less than a high school diploma (5.0%).

The same patterns existed in August 2000, although rates soared for all educational levels in the prior 20 months. Of households headed by someone with post-college education, 69.9% had Internet access. That compares to households headed by someone with a college degree alone (64.0%), those with some college experience (49.0%), those educated beyond high school but no college degree (29.9%), and those with less than a high school degree (11.7%).

The 1998-2000 expansion rates were highest for those at lower levels of education. For example, Internet access expanded by 134% for those with less than a high school education, by 62% for those with some college, and by 32% for those with post college education.

The median level of education among adult family heads is some college. This group had a larger point gain over 20 months (19 points) than households in the two higher education categories with 17 point gains each. Data relating to Internet access and computer ownership by education level can be found in the Appendix, Figures A6 and A12.

The interplay between education and income levels is worth examining more closely. Although both of these factors correlated with Internet access, as we have seen, they are also linked to each other. In terms of home Internet access rates, the ratio of the highest group to the lowest is more than five to one for both the income and education categories in Table I-2. Since the two are so correlated, we have examined whether just one factor is dominant and the other represents a misleading correlation, or whether both are independently associated with Internet access.

Figure I-9 presents some evidence that both income and education are independently associated with Internet access. Although the average Internet access rate for incomes of $75,000 and greater is 77.7%, it ranges from 82% for those with a college degree or more down to 51% for those with less than a high school education. Likewise, households with incomes between $15,000 and $34,999 had an average access rate of 28%, ranging from 46% for college or more down to 11% for less than high school. The same wide disparities occur within education categories. For example, among households in which the householder had some schooling beyond high school but not a college degree, home Internet access reached 76% in the over $75,000 income group but only 26% in the under $15,000 income group. Among households with incomes below $15,000 and less than a high school education, only 4% had Internet access at home.

Once again, groups with higher initial penetration rates generally had large point gains but lower than average expansion rates, as shown in Table I-2. Those with the lowest incomes and education had much lower initial home Internet rates in 1998; however, they had the largest expansion rates. Although the expansion rate for the country was 58%, no group with post high school education and incomes above $35,000 had expansion rates that large. Among those with at least a college degree, only those with the lowest household incomes had expansion rates above the national average.

The largest point gains (between 20 to 22 points) were registered by those with incomes above $75,000 and less than a college degree and those with $35,000 to $74,999 in income and some college education. Indeed, households with incomes more than $75,000 and at least a college degree have reached the flattening stage of the "S-Curve." Their 16.3 point gain leaves that group so close that they would hit 100% in less than two years if they continued at the recent pace.

RACE AND ETHNICITY

Between December 1998 and August 2000, there has also been a surge in uptake of Internet and computer access among households of different ethnic and racial origins.

Households of Asian Americans and Pacific Islanders have maintained the greatest Internet penetration at 56.8% in 2000. This group has also experienced the most dramatic growth in home Internet access in the last two years: an increase of 20.8 percentage points (from 36.0% in 1998). White households continued to have the second highest rate of access at 46.1% and experienced a growth of 16.3 percentage points (from 29.8% in 1998).

At the other end of the spectrum, Black and Hispanic households continue to experience the lowest Internet penetration rates (at 23.5% and 23.6%, respectively). Internet uptake by Black and Hispanic households has been strong in the last two years, however, as shown in Figure I-11. Between December 1998 and August 2000, access among Black households doubled from 11.2% in 1998 to 23.5% in 2000, a gain of 12.3 percentage points. Hispanic households' access increased 11 percentage points (from 12.6% in 1998 to 23.6% in 2000).

There is significant variation in Internet access and computer ownership within subgroups of these broad categories. For example, although Asian Americans and Pacific Islanders have high rates of connectivity as a group, there are subgroups that have lower rates of access due to lower income levels, educational attainment, or other reasons. By the same token, Blacks and Hispanics have high levels of connectivity despite lower rates overall.

This report does not include separate data on American Indians, Aleuts, and Eskimos (AIAE) because the sampled population from that group is too small for credible results.⁽⁷⁾

Although the percentage point change for Blacks and Hispanics was not as high as that for Asian Americans and Pacific Islanders or Whites, their rates of growth between 1998 and 2000 were striking. Internet access among Black households more than doubled (a 110% increase) between 1998 and 2000, while Hispanic households' access grew 87% in the same period. This compares to a growth rate of 55% for White households and 58% for Asian American and Pacific Islanders households.

Internet access among racial and ethnic groups continues to differ by geography and income level. With regard to geography, almost all groups had a slightly higher Internet penetration rate in urban areas (48.3% for Whites, 24.0% for Blacks, and 23.9% for Hispanics). Groups in rural areas, on the other hand, have experienced significantly lower penetration rates (40.9% for Whites, and 19.9% for Blacks and Hispanics). The survey's sample of rural Asian Americans and Pacific Islanders is too small for valid comparisons with their urban counterparts.

Income also affects whether households of different ethnic and racial backgrounds have Internet access. Households earning above $75,000 are highly likely to have Internet access (78.6% for Whites, 70.9% for Blacks, 63.7% for Hispanics, and 81.6% for Asian Americans and Pacific Islanders). The rates of connectivity decline significantly as income declines, although less so for Asian American and Pacific Islander households. While Hispanics and Blacks are particularly unlikely to have Internet access at incomes below $15,000 (5.2% and 6.4%, respectively), 33.2% of Asian American and Pacific Islander households in that lowest income bracket have Internet access.

Because income and education are so highly correlated with whether households have Internet access, the question arises as to whether those factors might fully explain the observed gaps between the national average and the rates for Blacks and Hispanics. Those two groups as a whole have lower incomes and lower education levels than the national average.

Differences in overall income and educational levels of Blacks and Hispanics do not fully account, however, for their lower levels of home Internet access. After adjusting for the effects of lower average income and educational attainment with shift-share analysis,⁽⁸⁾ we observe that: (1) a third to a half of the gap remains; (2) both groups made roughly the same gains over the last 20 months as the national average; and (3) both groups, on this adjusted basis for August 2000, had substantially surpassed the national average for December 1998. Figure I-12 depicts the results of this shift-share analysis. In August 2000, both Blacks and Hispanics had home Internet access 18 points below the national average. The effects of having levels of income and education lower than the national average, however, accounted for 9 percentage points of the gap for Blacks and for 12 percentage points of the gap for Hispanics.

Over the 20 months from December 1998 to August 2000, the share of homes online rose by 12 points for Blacks, by 11 points for Hispanics and by 15 points for the country as a whole. However, on an income- and education-adjusted basis, Blacks and Hispanics each rose by 14 points, which is essentially equivalent to the national gain. The 32% penetration rates for Blacks and the 36% for Hispanics on an adjusted basis for August 2000, while far short of the national average of 42%, were both well above the national rate of 26% in December 1998.

Data relating to Internet access among households of different races and ethnic origins can be found in the Appendix, Figures A10-A11.

The Internet Divide Continues

Substantial disparities have continued to widen, both when comparing Blacks and Hispanics against the national average and when comparing them against Whites. The divide between the Black household Internet access rate and the national average rate increased 3.0 percentage points, from 15.0 percentage points in December 1998 to 18.0 percentage points in August 2000. The divide between Hispanic households and the national average rate increased 4.3 percentage points, from 13.6 percentage points in December 1998 to 17.9 percentage points in August 2000.

A similar widening occurred between racial groups. Between October 1997 and December 1998, the gap in Internet access between White and Black households grew 5.1 percentage points, from a 13.5 percentage point difference in 1997 to a 18.6 percentage point difference in 1998. In the 20- month period between December 1998 and August 2000, the divide between White and Black households increased 4 percentage points, resulting in a percentage point difference of 22.6 points between White and Black households. The gap between White and Hispanic households grew 4.7 percentage points between 1997 and 1998, and then continued to widen even further (by 5.3 percentage points) between 1998 and 2000.

Between Asian Americans and Pacific Islanders and Whites, the gap grew from 6.2 percentage points in 1998 to 10.7 percentage points in 2000. No 1997 data are available for Asian Americans and Pacific Islanders.

While this measure of the Internet divide continued to widen, the high rates of expansion for Blacks and Hispanics suggest that, in time, this widening will subside. If computer ownership provides any pattern, we may soon see some stabilization and perhaps even narrowing of the Internet divide.

The Computer Divide Has Stabilized

Households of different ethnic and racial backgrounds also had disparate rates of ownership of computers. As with Internet access, households of Asian Americans and Pacific Islanders continue to exhibit the highest penetration rates (65.6%), followed by White households (55.7%), Hispanics (33.7%), and Blacks (32.6%).

All ethnic groups experienced comparable increases in computer penetration since 1998: ownership in 2000 was 10.6 percentage points higher for Asian Americans and Pacific Islanders, 9.4 percentage points higher for Blacks, 9.1 points higher for Whites, and 8.2 points higher for Hispanics.

As with Internet access, computer ownership is strongly influenced by income. Households earning more than $75,000 are consistently likely to own computers: 87.0% for White households, 86.9% for those of Asian Americans and Pacific Islanders, 83.4% for Blacks, and 76.1% for Hispanics. The computer divide becomes more pronounced at lower income levels, although less so for households of Asian Americans and Pacific Islanders. At incomes less than $15,000, Black households and Hispanic households are particularly unlikely to have computers (11.5% and 12.5%), compared to White households (22.8%) and Asian American and Pacific Islander households (39.4%).

Geography also plays a role in a household's likelihood of owning a computer. In general, households in rural areas are less likely to own computers (51.8% for Whites, 28.8% for Hispanics, and 27.5% for Blacks), while households in urban areas exceed the national average (57.3% for Whites, 34.2% for Hispanics, and 33.3% for Blacks).