|
Rural areas historically have been at the end of the line for telecommunication
infrastructure investment. At the end of the 19th century one company,
the Bell System, held all the patents (for the telephone system)
and the company collected monopoly rents, impeding a wide adoption
of the new technology. The company realized a great deal of profit
by restricting services to areas with a critical mass of wealthy
customers, mostly the largest urban areas. In practice it was the
classic monopolist profit-maximizing model. The growth and diffusion
of the telecommunication system went through many fits and starts
in the ensuing years because the patents raised economic and legal
barriers to telephone service for non-Bell System areas.
A socioeconomic and geographic pattern in the diffusion of telecommunication
services exists. Nine years ago the catch-phrase "Digital Divide"
came into use and was used to describe the distribution of telecommunication
services. While the term is used to describe a line separating advanced
telecommunication service "haves" from the "have-nots,"
like the term "poverty-line" the definition is a bit amorphous.
Some facts, shown below, will help provide some perspective.
Telephone service is an old service industry within the telecommunications
sector that has been undergoing significant industrial reorganization
because of recent technological advances such as cellular phone
service moving the industry away from the classic monopolist profit-maximizing
model. Despite the technological advances, the number of households
with telephones has been stable for the last 25 years at roughly
95 percent. It took nearly 100 years to reach that level. The percentage,
though stable, however, varies across:
- Regions (for instance, the Mississippi Delta has the lowest
percentage).
- Income groups (for instance, the share for households
with incomes greater than $40,000 was better than 98 percent,
while households with income less than $35,000 had shares falling
below 95 percent, with the lower the income the lower the percentage).
- Ethnic groups (for instance, 96 percent for White and
90 percent for Black households). The rate for ethnic groups within
rural areas also varies.
The telephone penetration rate for rural areas, in the aggregate
and largely as a consequence of Federal and State policies, has
been comparable to urban areas.
The most critical element in on-going convergence in the telecommunications
industry has been the Internet. Internet use by households also
increased significantly during the 1990s, from 22 percent in 1997
to 59 percent in 2003.
- The increase has occurred for all regions, income groups,
and ethnic groups.
- Higher income households are more likely to use the Internet,
ranging from less than 40 percent of households with income less
than $30,000, to over 80 percent of households in the $75,000
income bracket.
- Rural areas lag in Internet use, though the lag has decreased
dramatically over the last number of years. In 2003, 52 percent
of individuals residing in rural areas versus 60 percent of urban
residents used the Internet.
- The rural-urban difference in Internet penetration rates
within income groups, however, has largely disappeared.
Market Penetration of Rural Internet Access: Percent
of Persons With Access to the Internet, 2003
The critical issue in telecommunications has moved from whether someone has access to the Internet to the quality of the connection that they have. Broadband Internet use by has increased significantly, from none in 1997 to 37 percent in 2003.
- The increase has occurred for all regions, income groups, and ethnic groups.
- Higher income households are much more likely to use broadband than lower income households
- Rural areas lag in broadband Internet use, though the lag has begun to decrease. In 2003, 40 percent of individuals using the Internet and residing in urban areas versus 21 percent of rural Internet users used broadband at home.
Market Penetration of Rural Broadband Internet Access:
Percent of Internet Users With Broadband Access, 2003
|
