The Digital Divide

Still undecided about the upcoming elections? Forget about the future of the Microsoft (MSFT:Nasdaq - news - boards) antitrust case. Forget about whose health plan would be a boon to health maintenance organizations.

The real question savvy investors (and online journalists) should be asking in the coming weeks is: Which presidential candidate will get more people online?

Today, about half of all American homes have a personal computer. And, according to a recent Commerce Department study, 43.6 million households, or 41.5% of the U.S. total, have Internet access. That's a lot, but fewer than own mutual funds!

Indeed, even in the age of free Internet access and cheap PCs, the digital divide persists. Citizens living in cities are less likely to have Internet access than suburbanites. And when they do, it's frequently slow. (Time Warner's (TWX:NYSE - news - boards) Roadrunner unit - which should more aptly be called Snail -- says cable-modem service will be available in my Manhattan neighborhood about the same time Amazon.com (AMZN:Nasdaq - news - boards) reports a profit.)

More troubling are the enduring racial and income disparities. Time was, the symbols of prosperity were a chicken in every pot and a car in every driveway. These days, the symbols have morphed into a mouse in every den and a hard drive in every home office.

But according to a fascinating Commerce Department study entitled Falling Through the Net: Toward Digital Inclusion , just 19.2% of U.S. households with less than $15,000 in income had computers last August, and only 12.7% had Internet access. By contrast, more than 86% of those earning more than $75,000 owned PCs. The nation's poorest states have the lowest penetration of PC ownership and Internet access. And while 55.7% of white households own computers, just 33.7% of Hispanics and 32.6% of blacks do. Fewer than a quarter of black and Hispanic households have Internet access.

Both Vice President Al Gore and Texas Gov. George W. Bush have proposals intended to close these gaps. Between the two, Gore has the more far-reaching (and expensive) plans.

Gore may not have created the Internet. But he did support the Telecommunications Act of 1996, which in turn created the E-Rate program -- a $2.25-billion-per-year subsidy that allows schools to buy discounted Internet services.

About 95% of schools are now wired. Gore wants to finish the job. But he also promises more cash ($150 million a year instead of the current $75 million) to train teachers and students on safe and effective surfing. And (good news for Dell (DELL:Nasdaq - news - boards), Gateway (GTW:NYSE - news - boards) and Compaq (CPQ:NYSE - news - boards)) Gore would boost the number of modern multimedia computers in the classroom from the current ratio of one per nine students to one for every five. "I want to make sure that every American has the ABCs of the Internet: access, basic skills and high-quality content," Gore has proclaimed.

Gore also supports efforts outside the schools. He pledges $400 million to build a network of 2,000 Community Technology Centers in low-income neighborhoods by 2002, where people without home PCs can learn to use computers and the Internet. And he proposes giving businesses tax credits of up to $6,000 per employee for worker training in IT skills. Finally, Gore calls for an unspecified amount of federal loan guarantees to encourage broadband rollout in rural areas.

Bush would also invest $400 million to build a network of 2,000 Community Technology Centers. Bush also likes the E-Rate program, but wants to fold it and other federal programs into a $3 billion Enhancing Education Through Technology Fund to be run by the Department of Education.

Bush proposes new funds for the Department of Education to conduct and disseminate research on high-tech education. Moreover, the Texas governor simultaneously wants to offer local schools more flexibility in the way they use the funds, and to make them more accountable. He would link continued funding for technology initiatives to student performance.

"The real divide is in educational achievement, not just digital access," Bush has said. Indeed, in Texas, 90% of the public schools already have Internet access. But despite its high-tech pretensions, the Longhorn State lags in other areas. About 47.9% of all Texans have computers, and 38.3% have Internet access. Those figures are below the national averages, and better than only 13 states. (One of them is Gore's home state, Tennessee, where 45.7% have computers and 36.3% have Internet access.)

Companies that make products used in building computer networks -- everyone from Apple (AAPL:Nasdaq - news - boards) to ZipLink (ZIPL:Nasdaq - news - boards) -- may benefit from these programs. But any increase in government spending would be a drop in the massive bucket of overall spending on information technology.

Still, the policies have broader implications for all companies, and for society. As both candidates point out, widespread access to personal computers and the Internet aren't simply matters of economic growth and productivity, they're matters of social justice.

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Daniel Gross (www.danielgross.com) is the author of Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance. The New York-based journalist has written about the intersection of business and politics for The Washington Post, New York magazine, The New York Times and The New York Observer. He welcomes your feedback at [e-mail].