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Rural areas historically have been at the end of the line
for telecommunication investment because of the relatively
high cost and low profit potential of extending service
into lightly populated areas. At times legal and regulatory
hurdles, such as AT&T's early monopolistic practices
resulting from patent ownership, also impeded widespread
rural availability. As a result, a socioeconomic and geographic
pattern in the diffusion of telecommunication services
exists. Telephone service is an old service industry within
the telecommunications sector. Despite recent technological
advances, such as the growth in cellular phone service,
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 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. Nonetheless, even for a well-established
technology such as basic telephone service, use varies
by region, household income, and other socioeconomic characteristics.
The most critical element in the ongoing convergence in
the telecommunications industry has been the Internet.
Twelve years ago the catch-phrase "Digital Divide" came
into use to describe the distribution of Internet services—the
separation between Internet service "haves" and "have-nots." In
the intervening years, Internet use by households
(either in- or outside the home) has increased significantly,
from 22 percent in 1997 to 71 percent in 2007.
- The increase has occurred for all regions, income groups,
and ethnic groups.
- Higher income households are more likely to use the
Internet, with less than 50 percent of households with
income less than $30,000 connected, while over 90 percent
of households in the $75,000 plus income bracket have
Internet service.
- Rural areas lag in Internet use, though the difference
has decreased dramatically over the last 10 years.
In 2007, 63 percent of rural residents versus 73 percent
of urban residents used the Internet somewhere.
- The rural-urban difference in Internet penetration
rates within income groups, however, has largely disappeared.
The critical issue in the digital economy has moved from
whether someone has access to the Internet to the quality
of the connection that they have—specifically, the speed
and reliability of their Internet connection. Broadband,
or high-speed, Internet use has increased significantly,
from no significant use in 1997 to 56 percent of households
in 2007 (82 percent of households with in-home Internet
access).
- 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 2007, 84 percent
of urban households with in-home Internet service had
a broadband connection, compared with 70 percent of rural
households with in-home Internet service.
Market considerations drive the adoption and diffusion
of new communication and information technology. The diffusion
process, however, is neither uniform nor continuous across
regions, income groups, ethnic groups, and economic activities.
Rural and poor communities, in general, lag urban and
richer communities in new telecommunication technology;
the less returns a service provider is likely to reap,
the less likely they will invest in any particular location.
The Communications Act of 1934 and subsequent laws, including
the Telecommunications Act of 1996, have sought to address
this through what are called universal service provisions
(see the Policy chapter).
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