A. Introduction

The "trendline study" in this Appendix identifies household trends in telephone, computer, and Internet penetration rates from 1984 through 1998. This historic review relies on data collected by the U.S. Department of Commerce's Bureau of the Census during the watershed period of pro-competition and regulatory reform policies following the breakup of the former Bell System through court decree. Specifically, we have relied on the Census Bureau's Current Population Surveys (CPS) conducted in 1984, 1989, 1994, 1997, and 1998. In a special supplement to each CPS, the Census Bureau compiled the requisite data by surveying 48,000 or more households. The Census Bureau also cross-tabulated the information gathered according to specific variables, such as income, age, race, educational level, and geographic categories (such as urban, rural, and central city, as well as nationally and by region).

The following analysis highlights many of the significant trends in electronic access during the past fifteen years. For each topic, we have summarized some key findings, examined the changing profile of the "most" and "least" connected, and analyzed the impact of specific demographic variables. The accompanying charts provide a wealth of data that we have only begun to tap. These data and charts should provide invaluable information for policymakers and researchers continuing to explore this area.(1)

B. Telephone Penetration

1. Highlights

Stable penetration rates. A review of the CPS time series data demonstrates that Americans have maintained consistently high telephone penetration rates between 1984 and 1998. On average, 91.6% of Americans were connected by telephone in 1984. That percentage rose to 94.2% by 1993 but has failed to surpass that level over the last 5 years. In 1998, U.S. penetration stood at 94.1%. During 1994-1998, rural, urban, and central city areas increased slightly, and by 1998 all areas approximated 94% except for central city (92.9%). (Chart A-1)

Narrowing subscribership gap. The most significant change during the 1984-1998 time period is the particularly high rate of growth in telephone subscribership among households that have traditionally been the least connected. Households that were far less likely to own telephones in 1984 (such as those earning less than $10,000 and unemployed households) still lag behind the national average, but are now far more likely to own telephones. (Chart A-2) Low-income households (those earning less than $5,000) experienced a particularly high rate of growth (nearly 10%) between 1984 and 1998. Id.

At the same time, households that were the most connected (e.g., those earning higher incomes, seniors, and employed households) have experienced a slight decline in telephone penetration rates in the last few years. The reasons for this decline are unclear. It may be due, in part, to the growing prevalence and substitution of wireless devices, which were not included in the survey results. At any rate, with the rapid growth in telephone penetration among the least connected and a slight decline among certain connected groups, the gap between those with and without telephones has decreased.

2. Profiles of the Most and Least Connected

Not surprisingly, households earning high incomes continue to be the most connected, and those with low incomes (particularly those earning less than $5,000) have remained the least connected. In 1989, low-income households living in central cities had the lowest telephone subscription rates (72.6%, compared to 73.8% in rural areas and 76.2% in urban areas); in 1998, by contrast, low-income families living in rural areas were the least connected (76.3%, compared to 78.7% in central cities and 79.2% in urban areas). Geographic location has played far less of a role with regard to penetration rates at higher incomes.

3. Variables in Telephone Penetration

C. Computer Ownership

1. Highlights

Increasing Computer ownership. Computer ownership has soared for all groups in the last fourteen years. The rate of ownership has grown rapidly for all demographic groups: at least fivefold across races and ethnic groups, and more than fourfold across all age groups, and all educational groups, for example.

Prevailing Factors in Computer Ownership. While ownership has increased for all groups, certain characteristics continue to be strong determinants of the rate of growth and of a household's likelihood of owning a computer. Income, race, and education level, for example, continue to closely correspond with the computer penetration rate.

At the same time, age and employment status are beginning to become less significant variables, particularly as seniors and those "not in the labor force" buy computers with increasing frequency. In 1984, 2.5% of households 55 and older owned personal computers (PCs), compared to 15.5% of 35-44 year-olds. In 1998, one-quarter of seniors (25.0 %) owned PCs. Whether a family has children is also becoming a less significant determinant of whether the household owns a computer. (Chart A-13) In 1984, non-family households were particularly unlikely to own PCs (3.7%), followed by family households without children (5.1%). In 1998, these two categories of households are still less likely to own computers than households with children, but nevertheless now buy computers at a far higher frequency (27.5%, and 43.2%, respectively).

Widening Ownership Divide. The rate of growth has also had a more significant impact on some groups than others. Those that were most likely to own PCs in 1984, are now especially likely to own them in 1998, even though they may have experienced a lower rate of growth than other groups. For example, for the highest income group (those earning $75,000 and above), ownership has grown nearly fourfold (from 22.1% to 79.9%). While the growth rate for the lowest income group (those under $5,000) was nearly tenfold during the same period, only one of six households at this income bracket owned computers in 1998. (Chart A-8)

The trend of seeing the "computer-rich get richer" means that the digital divide among groups is widening over time. The twenty percentage point difference that existed between the highest and lowest income levels in 1984 has now expanded to a 64 percentage point difference. What was a fifteen percentage point gap in 1984 between those with a college degree and those with elementary education is now nearly a 61 percentage point gap. These trends will continue to occur until the relative growth rates among the least connected significantly surpass the growth rates for the more connected on a sustained basis.

2. Profiles of the Most and Least Connected

Certain households have continued to own PCs at higher rates: those earning higher incomes, those with a college degree or higher, households consisting of married couples with children, households located in the West region of the country, and those that are employed. One significant change has occurred based on race/ethnic origin. In 1984, White households accounted for the highest computer penetration rate; in 1989, they were surpassed by "other non-Hispanic" (e.g., Asians, American Indians, and Eskimos) households, which held an even more significant lead in 1998. (Chart A-11)

In examining the "least connected," households earning lower incomes, those with lower education levels, those located in the South, and those under the age of 25 have consistently had lower computer ownership rates. In particular, households earning low incomes and living in rural areas have repeatedly reported the lowest penetration rates. Rural black households have also remained the least likely group to own a PC (2.7% in 1984, 17.9% in 1998), followed by Hispanics living in central cities (3.1% in 1984, 21.4% in 1998).

3. Variables in Computer Penetration

D. Internet Access

An examination of CPS time series data reveals several clear-cut trends with respect to the on-line experience of U.S. households since the break-up of AT&T. The discussion below focuses on the Internet--the ability of Americans to access it by modem and to use it (for e-mail). More specifically, the analysis documents growing information access and exchange, a widening digital gap, and the demographic and geographic profiles of those who are most and least connected.

The data used in this discussion pertain to modem ownership and e-mail access among households. Until 1998, modem ownership was measured as a means of determining the level of Internet access. That practice ceased in 1998 because nearly all computers contain modems today and because modems, in practice, are not always used to connect to the Internet. Nevertheless, for historical purposes, modem ownership serves as the best proxy available for measuring Internet access.

1. Modems (2)

     a. Highlights

Growing information access and exchange. As gauged by household ownership of modems, Americans have dramatically increased their ability to access the Internet. In 1989, only 3.3% of the nation's households possessed modems; by 1997, the figure had rocketed to 26.3%, an eightfold increase. Viewing Internet access through various demographic perspectives provides a similar picture of tremendous growth in modem ownership.

Widening digital divide. In general, underserved groups (such as low-income users) and rural areas have fallen further behind the modem ownership leaders in their respective categories in recent years.

     b. Profiles of the Most and Least Connected

The CPS data affords some illuminating profiles of the Americans who are the most and least connected.

2. E-mail Use

     a. Highlights

E-mail usage also grew at a tremendous rate during the shorter, more recent interval 1994-98. Usage by all races or ethnic origins grew at least 3.5 times during the span. Every income and educational level as well as labor force category exhibited growth of four times or more. All age groups have increased by at least 4.5 times, while usage by household types and regions rose some fivefold.

Widening digital divide. The digital gap also widened in all major categories with respect to e-mail usage during 1994-98. With the exception of regional use (where the West's lead more than doubled), such usage rose by fourfold (or more) regarding income, race/origin, age, educational level, household type, and labor force. Interestingly, the gap actually declined from the 1997-98 period with respect to income, but grew substantially over the longer period 1994-98.

     b. Profiles of the Most and Least Connected

The profiles for e-mail usage are similar to those of modem users. Some notable changes between 1994-1998 include surges by certain rural areas. In the Northeast, rural households led all others in the region and all other rural areas across regions. Additionally, female households with children in rural areas overtook those types of households in urban America or central cities.

E. Conclusion

The trendline study for 1984-1998 reveals a number of promising patterns over the last fifteen years. While telephone penetration rates have stabilized, the traditional "have nots" (e.g., households with lower incomes, lower education levels, those under age 25, and certain minorities) have become more connected over time. Nevertheless, these groups are still less likely to have a telephone than other households.

The patterns for computer ownership and Internet access are radically different from telephone ownership. All groups in all areas of the country have dramatically increased their access to electronic services. As a result, computers have become far more pervasive, as illustrated by their increasing use among seniors. Internet access has become more common among households of different demographic characteristics.

Despite these patterns of growth, the information "haves" have dramatically outpaced the information "have nots" in their access to electronic services. As a result, the gap between these groups -- the digital divide -- has grown over time.

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Glossary -->

1. Most of the data presented in this report include statistics through the year 1998, with one notable exception. In 1998, the CPS supplement survey discontinued the question about modems in the household. Analysts believed a direct question about Internet access would be more meaningful than ownership of a modem.

2. The charts in this section may be found at NTIA's web site at

3. By "Native Americans" this report is referring to American Indians, Eskimos, and Aleuts.