James W. McConnaughey, Senior Economist
Office of Policy Analysis and Development (OPAD)

Wendy Lader, Senior Policy Advisor
Office of the Assistant Secretary


Richard Chin, Intern, OPAD
Douglas Everette, Intern, OPAD


Larry Irving, Assistant Secretary and Administrator
Shirl Kinney, Deputy Assistant Secretary
Bernadette McGuire-Rivera, Associate Administrator,
Office of Telecommunications and Informations Applications
Kelly Levy, Acting Associate Administrator, OPAD
Stephen J. Downs, Director,
Telecommunications Information Infrastructure Program (TIIAP)
Francine Jefferson, Telecommunications Policy Analyst, TIIAP
Tatia Williams, Acting Director, Minority Telecommunications Dev. Program
Roanne Robinson, Special Assistant to the Assistant Secretary

We wish to thank Jennifer C. Day, Eric C. Newburger, and Robert A. Kominski of the U.S. BUREAU OF THE CENSUS, U.S. DEPARTMENT OF COMMERCE for their valuable contributions to this project.

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I. Introduction

The concept of "universal service" in U.S. telecommunications policy has traditionally referred to the goal that all Americans should have access to affordable telephone service. As America has increasingly become an information society, however, that concept has broadened to include access to information services. Now that a considerable portion of today's business, communication, and research takes place on the Internet, access to the computers and networks may be as important as access to traditional telephone services.

At the request of Vice President Gore, the Commerce Department's National Telecommunications and Information Administration ("NTIA") has analyzed telephone and computer penetration rates across the United States to determine who is, and who is not yet, connected. The Administration has made it a fundamental goal to connect all Americans to the information infrastructure. To address that goal, NTIA held a conference in February, 1998 on "Connecting All Americans." The data in this report sheds greater insight on recent trends in telephone and computer usage, which should assist policymakers as they consider steps to connect all Americans to the Information Superhighway.(1)

II. Background

This is the second profile of telephone and consumer penetration released by NTIA. In the first profile, published in "Falling Through the Net: A Survey of the 'Have Nots' in Rural and Urban America" (July 1995), NTIA surveyed trends in telephone subscribership, as well as ownership and usage of personal computers (PCs) and modems, using 1994 data. NTIA obtained this data by contracting with the U.S. Census Bureau to add questions on PC/modem ownership and usage in its November 1994 "Current Population Survey" ("CPS"). As we explained in that report, this data constituted the first census survey of its kind regarding PC/modem ownership.

The present survey updates those results, using similar data compiled by the Census Bureau in October 1997. The Census Bureau compiled this data through 48,000 door-to-door surveys. As in 1994, the Census Bureau has cross-tabulated the information gathered according to specific variables, such as income, race, age, educational attainment, as well as geographic categories (i.e., rural, urban, and central city, as well as by state and region). These tabulations permit insights into the characteristics of Americans that have access to the information infrastructure, and those that do not.

III. Highlights

The following highlights from the 1997 data are discussed below: the expanded information access, the persisting "digital divide," and a profile of the "least connected."

Expanded information access. The 1997 data demonstrate that, as a nation, Americans have increasingly embraced the Information Age through electronic access in their homes. The 1997 nation-wide data show the following nation-wide penetration rates -- 93.8% for telephones, 36.6% for personal computers (PCs); 26.3% for modems, and 18.6% for on-line access (Chart 1). Compared to the 1994 survey results, the nationwide telephone penetration has remained unchanged. The computer penetration rate, however, has grown substantially in the last three years: PC ownership has increased 51.9%, modem ownership has grown 139.1%, and E-mail access has expanded by 397.1%.

Persisting "digital divide." Despite this significant growth in computer ownership and usage overall, the growth has occurred to a greater extent within some income levels, demographic groups, and geographic areas, than in others. In fact, the "digital divide" between certain groups of Americans has increased between 1994 and 1997 so that there is now an even greater disparity in penetration levels among some groups. There is a widening gap, for example, between those at upper and lower income levels. Additionally, even though all racial groups now own more computers than they did in 1994, Blacks and Hispanics now lag even further behind Whites in their levels of PC-ownership and on-line access. The following represent some of the more significant findings.

Geographic area. Being located in a rural, urban, or central city setting can make a difference. Regarding telephones, penetration in rural areas (94.3%) currently exceeds the national average and has risen slightly (by .4 percentage points) since 1994 (Chart 2). On the other hand, urban areas (93.6%), and particularly central cities as a group (92.1%), trail the national average and show little change since 1994. By region, the Midwest's central cities exhibit the lowest phone penetration (90.4%) of all geographic areas, while the Northeast's rural areas outstrip all other geographic areas (97.2%) (Chart 9). After accounting for income, however, there is not a significant difference between rural, urban, and central city areas (Chart 3).

Although PC ownership has grown by 10-13 percentage points in all areas since 1994, central cities again lag behind the national average for PC ownership and on-line access (32.8%, 17.3%), as do rural areas (34.9%, 14.8%) (Charts 10). Urban areas are slightly higher than the average (37.2%, 19.9%). The West's urban areas (43.9%, 23.14%) rank highest in PC and on-line access, while the Northeast's central cities have the lowest penetration rates (24.7%, 12.6%) (Charts 19, 24). After accounting for income, there is not a significant difference between rural, urban, and central city areas for computer penetration (Chart 11), although rural areas still have a significantly lower rate for on-line access (Chart 20).

Income. Income greatly affects penetration levels. For telephones, households earning less than $20,000 per year trail the national average (Chart 3). Those earning less than $5,000 are the worst off: roughly one in four has no phone. The telephone penetration rate is lowest for low-income households in rural areas (74.4%). A similar direct relationship between income level and magnitude of penetration appeared in 1994, although the central city poor then had the lowest phone penetration. For computers, households below $35,000 in annual income all have PC and on-line access levels below the national average (36.6%, 26.3%) (Chart 11). Rural households earning between $5,000 - $10,000 account for the lowest penetration rate for PCs (7.9%) and on-line access (2.3%). By contrast, households earning more than $75,000 in urban areas have the highest PC-ownership rates (76%) and on-line access rates (50.3%).

Although all income groups are now more likely to own a computer, the penetration levels for those at higher incomes have grown more significantly. As a result, the gap in computer ownership levels between higher-income households and lower-income households has expanded in the last three years. For example, the difference in PC-ownership levels between households earning $10,000 - $14, 000 and those earning $50,000 - $74,999 was 47.7 percentage points in 1997, up from 38.2 percentage points in 1994.

Race. There is still a significant divide among racial groups in telephone penetration. Overall, White households have a far higher telephone penetration rate (95.9%) than Black (86%) or Hispanic (86.5%) households (Chart 4). This divide is particularly pronounced at incomes below $15,000: 90.3% for Whites, 76.3% for Blacks, and 78.4 % for Hispanics. "Other non-Hispanic" households have an overall telephone penetration rate (92.7%) close to the national average (93.8%), but the rate for this group in rural areas is significantly lower than average (82.8%).(2)

The divide among races is even more striking for PC ownership and on-line access. While the ownership of PCs have grown most significantly for minority groups since 1994, Blacks and Hispanics still lag far behind the national average (Chart 12). White households are still more than twice as likely (40.8%) to own a computer than Black (19.3%) or Hispanic (19.4%) households.(3) This divide is apparent across all income levels: even at incomes higher than $75,000, Whites are more likely to have PCs (76.3%) than are Blacks (64.1%) (Chart 13). Similarly, the rates for on-line access are nearly three times as high for Whites (21.2%) as for Blacks (7.7%) or Hispanics (8.7%).

Significantly, the digital divide between racial groups in PC-ownership has increased since 1994 (Chart 14). In 1997, the difference in PC-ownership levels between White and Black households was 21.5 percentage points, up from 16.8 percentage points in 1994. Similarly, the gap in PC-ownership rates between White and Hispanic households in 1997 has increased to 21.4 percentage points, up from 14.8 percentage points in 1994. This gap has increased at almost all income levels, including at incomes above $75,000, where some might have expected computer-ownership rates to converge (Chart 15).

Age. As in 1994, those furthest behind the national average for telephone penetration are the youngest (under 25 years) at 84.4% (Chart 6). Young households in rural areas are even less likely to have a telephone (81.7%). Seniors (55 years and older), by contrast, account for the highest telephone penetration (96.1%), particularly in rural areas (96.7%). With respect to computer penetration, as in 1994, seniors account for the lowest age category (21.0% for PCs, 8.8% for on-line access), followed by the young (28.0% for PCs,17.1% for on-line access) (Charts 16, 22). Those households most likely to own a PC are in the 35-44-year-old bracket (49%).

Education.The level of education affects the penetration rates much as income does: generally, the greater one's education, the greater the likelihood that person has a phone, PC, or modem. Those with college degrees are far more likely than those without any high school education to have telephone service (97.6% vs. 87.8%) (Chart 7). The comparison is even more striking with respect to PC ownership: those with a college education are almost ten times as likely to own a computer as those without any high school (63.2% vs. 6.8%) (Chart 17). This difference in PC-ownership is even more distinct in rural areas: 64.7% versus 5.3%. Most striking are the differences in on-line access among those with a college degree (38.4%), those with a high school diploma (9.6%), and those without any high school education (1.8%) (Chart 23).

Household Type. A new finding in the 1997 data is that family structure can also make a significant difference. Households composed of married couples with children, and families without children, exceed the national average in telephone penetration (96% and 96.7%, respectively) (Chart 8). Single parent households trail the national average: male-headed households have telephone penetration rates of 87.1%, female-headed households have rates of 86.3%. Households composed of married couples with children are roughly twice as likely to own PCs and have on-line access (57.2%, 29.4%, respectively) as are single parent households headed by a male (30.5%, 14%, respectively) or a female (25%, 9.2%) or households without families (23.5%, 18.9%, respectively) (Chart 18).

Profiles of "The Least Connected."The following are profiles of groups that are among the "least connected," according to the 1997 data.

IV. Policy Implications

The data show that, although the telephone penetration rate has not changed, an increasing number of Americans have become connected to the Information Superhighway in the last three years. More Americans have bought PCs and are connecting to on-line services than in 1994. Although some groups are purchasing and using computers more than others, all groups have shown an increase in PC-ownership levels.

Nevertheless, significant segments of the population still remain unconnected by telephone and/or computer. The above data demonstrate that there are still pockets of "have nots" among the low-income, minorities, and the young, particularly in rural areas and central cities. Policymakers should continue to focus on connecting these populations so that they too can communicate by telephone or computer. These populations are among those, for example, that could most use electronic services to find jobs, housing, or other services. Because it may take time before these groups become connected at home, it is still essential that schools, libraries, and other community access centers ("CACs") provide computer access in order to connect significant portions of our population.

V. Methodology and Definitions

The tables and charts that follow draw upon the results of the October 1997 and the November 1994 CPS data compiled by the Census Bureau. The CPS samples were selected from the 1990 Decennial census files with coverage in all 50 states and the District of Columbia. The sample is continually updated to account for new residential construction. The United States was divided into 2,007 geographic areas, typically a county or several contiguous counties. A total of 754 geographic areas were selected for the 1997 CPS survey. About 48,000 households were interviewed for this survey.

The Census Bureau defines terms as follows. Race is defined as a concept used by individuals as a self-identification of "biological stock." Such identifiers include White, Black, Asian or Pacific Islander, American Indian, Eskimo, or Aleut. In addition to the race identifier, all respondents were asked if they classify themselves as Hispanic in origin. To prevent double counting of people of various races who also claimed Hispanic origin, the Census Bureau created the following race categories: White - non-Hispanic, Black - non-Hispanic, other - non-Hispanic, and Hispanic. The "other-non-Hispanic category" includes Asians and Pacific Islanders, American Indians, Eskimos, and Aleuts.

With respect to geographic areas, the Census Bureau defines "urban" as designated areas comprised of all territory, population, and housing units of 2500 or more persons. "Rural" areas constitute territory, population and housing units not classified as urban; "places of less than 2500" persons and, what the Census Bureau refers to as, "not in places" (areas not part of or outside of designated Census areas). Our analysis also includes areas designated as "central city" areas or part(s) of a Metropolitan Statistical Area ("MSA") or Primary Metropolitan Statistical Area ("PMSA") that meet the standards of the "largest place," or places (based on population and other criteria within that MSA or PMSA.

1. Data on telephone subscribership is also tracked by the Federal Communication Commission's Industry Analysis Division.

2. "Other non-Hispanic" includes Asian Americans, Native Americans, Pacific Islanders, Aleuts, and Eskimos. Because of the low sample size, these groups could not be disaggregated. Based on 1990 census and 1994 CPS data, and more recent anecdotal evidence, we believe that American Indian reservations continue to lag behind the national and rural telephone penetration rates and may account for the low rates among rural "other non-Hispanics."

3. "Other non-Hispanics" have the highest computer penetration (47%) and on-line access (25.2%) of all groups in the U.S. In urban areas, these figures are even higher: 48.4% and 26.4% for computer and on-line access, respectively. However, in rural areas, these figures lag behind the national average: computer penetration is 35.8%, and on-line access is 16.1%.

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